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Contents
002
008
011
025
032
035
042
053
054
056
057
058
059
061
095
098
Overview of Key Business and Financial Data ..
Chairman’s Statement .........................................
Management Discussion and Analysis of
Financial Conditions and Operating Results ..
Business Performance .........................................
Investor Relations ................................................
Corporate Governance ........................................
Disclosure of Major Events .................................
Report of Independent Auditor ..........................
Condensed Consolidated Interim
Balance Sheet ...................................................
Condensed Consolidated Interim
Income Statement ............................................
Condensed Consolidated Interim
Statement of Comprehensive Income ...........
Condensed Consolidated Interim
Statement of Changes in Equity .....................
Condensed Consolidated Interim
Cash Flow Statement .......................................
Notes to the Condensed Consolidated
Interim Financial Information .........................
Company Profile ..................................................
Definitions ............................................................
CHINA COAL ENERGY COMPANY LIMITED
2
Interim Report2010
Overview of Key Business and Financial Data
January Januaryto to
June June PercentageItems 2010 2009 change (%)
(1) Coal operations (10 thousand tons)
Raw coal production volume* 6,226 4,906 26.9
Sales volume of commercial coal 5,933 4,113 44.2
Of which: Sales volume of self-produced commercial coal 4,616 3,670 25.8
(2) Coking operations (10 thousand tons)
Coke production volume 111 90 23.3
Sales volume of coke 127 98 29.6
Production volume of methanol 7.7 — —
Sales volume of methanol 11.6☆ — —
(3) Coal mining equipment operations
Coal mining equipment production value (RMB100 million) 38.6 30.7 25.7
Production volume of coal mining equipment (10 thousand tons) 16.2 11.9 36.1
Sales volume of coal mining equipment (10 thousand tons) 13.8 10.5 31.4
* The raw coal production volume during the reporting period represents self-produced raw coal production volume.☆ Please see “Management Discussion and Analysis of Financial Conditions and Operating Results” for the reason why
the sales volume exceeded the production volume.
➢ Raw coal production volume amounted to 62.26 million tons, representing anincrease of 13.20 million tons or 26.9% over the same period last year.
CHINA COAL ENERGY COMPANY LIMITED
3
Interim Report2010
Overview of Key Business and Financial Data
➢ Sales volume of commercial coal reached 59.33 million tons, representing an increaseof 18.20 million tons or 44.2% over the same period last year. Sales by spot tradingamounted to 17.62 million tons, representing an increase of 9.85 million tons overthe same period last year and accounted for 29.7% in total sales.
➢ Selling price of self-produced commercial coal was RMB463/ton, representing anincrease of RMB40/ton or 9.5% over the same period last year.
CHINA COAL ENERGY COMPANY LIMITED
4
Interim Report2010
Overview of Key Business and Financial Data
➢ Coke production volume amounted to 1.11 million tons, representing an increaseof 210,000 tons or 23.3% over the same period last year. Coke sales volumeamounted to 1.27 million tons, representing an increase of 290,000 tons or 29.6%over the same period last year.
➢ Coal mining equipment production volume amounted to 162,000 tons, representingan increase of 43,000 tons or 36.1% over the same period last year. Sales volumeamounted to 138,000 tons, representing an increase of 33,000 tons or 31.4% overthe same period last year.
CHINA COAL ENERGY COMPANY LIMITED
5
Interim Report2010
Overview of Key Business and Financial Data
Summary of condensed consolidated interim balance sheet
Unit: RMB100 million
Notes toAs at As at 31 financial
Items 30 June 2010 December 2009 statements
Assets 1,162.78 1,048.55
Of which: Property, plant and equipment 397.91 367.29 Note 5
Mining rights 158.66 121.76 Note 6
Investments in associates 20.27 20.30
Inventories 58.23 49.78 Note 7
Trade and note receivables 79.07 49.64 Note 8
Term deposits with initial terms of over three months 222.26 228.13 Note 10
Cash and cash equivalents 126.63 126.28 Note 10
Equity 788.94 734.43
Of which: Equity attributable to the equity holders of the Company 676.75 642.28
Non-controlling interests 112.19 92.15
Liabilities 373.84 314.12
Of which: Long-term borrowings 115.35 112.87 Note 12
Provision for close down, restoration andenvironmental costs 11.27 11.56 Note 16
Trade and note payables 78.83 68.01 Note 14
Tax payable 14.26 6.10
CHINA COAL ENERGY COMPANY LIMITED
6
Interim Report2010
Overview of Key Business and Financial Data
Summary of condensed consolidated interim income statement
Unit: RMB100 million
For the For the Notes tosix months ended six months ended financial
Items 30 June 2010 30 June 2009 statements(Restated)
Revenue 350.90 227.43 Note 4
Cost of sales 257.59 161.46
Gross profit 93.31 65.97
Profit from operations 82.71 62.44
Profit before income tax 80.08 60.90
Profit for the period 59.73 45.98
Profit attributable to the equity holders of the Company 54.46 43.42
Basic and diluted earnings per share for the profitattributable to the equity holders of the Company (RMB Yuan) 0.41 0.33 Note 21
Summary of the operating results of segments (for the six months ended and as at 30June 2010)
Unit: RMB100 million
Coal miningCoal Coking equipment Other Unallocated
Items operations operations operations operations items Elimination Total
Revenue 280.82 25.16 33.83 19.01 — -7.92 350.90
Of which: Revenue fromexternal sales 278.79 25.16 30.42 16.53 — — 350.90
Profit from operations 78.48 0.05 2.88 1.05 2.93 -2.68 82.71
Profit/(Loss) before income tax 76.62 -0.42 2.61 0.82 1.44 -0.99 80.08
Assets 699.01 72.91 83.33 56.90 281.57 -30.94 1,162.78
Liabilities 245.09 6.28 38.38 35.52 74.79 -26.22 373.84
CHINA COAL ENERGY COMPANY LIMITED
7
Interim Report2010
Overview of Key Business and Financial Data
Summary of condensed consolidated interim cash flow statement
Unit: RMB100 million
For the six months For the six monthsItems ended 30 June 2010 ended 30 June 2009
(Restated)
Net cash generated from operating activities 48.78 44.26
Net cash used in investing activities -49.55 -43.79
Net cash generated from financing activities 1.11 12.66
Net increase in cash and cash equivalents 0.34 13.13
Cash and cash equivalents at beginning of the period 126.28 78.88
Net foreign exchange gains 0.01 0.02
Cash and cash equivalents at end of the period 126.63 92.03
Reconciliation of profit for the period to net cash inflows generated from operations
Unit: RMB100 million
For the For thesix months ended six months ended
Items 30 June 2010 30 June 2009(Restated)
Profit for the period 59.73 45.98
Adjustments for:Depreciation and amortization 13.53 9.26
Net gains from disposal of property, plant and equipment -0.11 -0.03
Provision for/(reversal of) impairment of receivables, inventories andproperty, plant and equipment 1.16 -0.77
Share of profits of associates and jointly controlled entities -0.15 -0.14
Net foreign exchange losses/(gains) 0.51 -1.27
Gains on disposal of investments -0.06 -1.69
Interest income -2.77 -5.53
Interest expense 2.09 2.89
Income tax expense 20.35 14.92
Negative goodwill -2.78 —
Changes in working capital -31.35 -13.73
Decrease in provision for employee benefits -0.29 -0.18
Increase/(Decrease) in provision for close down, restoration andenvironmental costs 0.30 -1.16
Cash generated from operations 60.16 48.55
CHINA COAL ENERGY COMPANY LIMITED
8
Interim Report2010
Chairman’s Statement
Dear shareholders,
In the f i rst half of 2010, the PRCgovernment continued to implement apackage of plans to cope with the globalfinancial crisis, accelerate transformation ofthe mode of economic development andpromote structural change of economy.China’s overall economy maintainedpositive momentum. Due to the stable andrelatively fast economic growth, the supplyof and demand for coal in China remainedbalanced and coal prices had a slightfluctuation at a high level. In line with itsannual production and operation goals,China Coal Energy organized its productionin a sensible manner by focusing on thecorre lat ion among i ts product ion,transportation and sales, and made effortsto mitigate adverse impact from safeproduction. The Company maintainedposit ive momentum for i ts overal lproduction and operation. On behalf of theBoard, I am pleased to report the interimresults of the Group for the year 2010 toshareholders.
OPERATIONAL RESULTS TORECORD HISTORICAL HIGH
In the first half of 2010, the total raw coalproduction volume of the Companyamounted to 62.26 million tons, representing an increase of 26.9% over the same period last year. Pingshuo MiningArea had a raw coal production volume of 53.24 million tons, representing an increase of 24.8% over the same periodlast year. The production volume of coking operations, coal mining equipment operations and power generation operationsalso maintained a steady growth. Our coal sales volume amounted to 59.33 million tons, representing an increase of44.2% over the same period last year. For the six months ended 30 June 2010, the Company recorded revenue ofRMB35.090 billion, representing an increase of 54.3% over the same period last year. Profit before tax of the Companyamounted to RMB8.008 billion, representing an increase of 31.5% over the same period last year. Profit attributable toequity holders of the Company was RMB5.446 billion, representing an increase of 25.4% over the same period last year.Basic earnings per share amounted to RMB0.41, representing an increase of RMB0.08 over the same period last year.
Wang An Chairman
CHINA COAL ENERGY COMPANY LIMITED
9
Interim Report2010
Chairman’s Statement
NEW PROGRESS ON COAL RESOURCES RESERVE
The Company continued to expand its coal resources reserve through increasing premium coal reserve, optimizing itscoal products structure and improving the competitiveness of its future products. In the first half of 2010, the Company’sreserve of premium coal increased by approximately 923 million tons through forming joint ventures and developingcooperations. The Company obtained resources reserve of 573 million tons through acquiring 55% equity interest inXiaohuigou Coal, and obtained resources reserve of 350 million tons through cooperation with local coal enterprise inYan’an, Shaanxi to develop Hecaogou Coal Mine. The Company also sped up the consolidation of relevant coal fields inHujierte Mining Area, Inner Mongolia and principally established its position of development entity in Hujierte MiningArea. China Coal Group, the controlling shareholder of the Company also increased its annual production capacity byalmost 20 million tons through consolidation of local coal mines in Shanxi province, which laid a solid foundation forChina Coal Energy to increase its resources reserve in the future.
STEADY PROGRESS IN KEY CONSTRUCTION PROJECTS
The Company actively sought governmental support from different levels, sped up project approval process and steadilydeveloped the construction of its existing projects. The construction of key projects has also made new progress. Theplanning for circular economy demonstration project in Pingshuo Mining Area and the comprehensive planning for NalinRiver Mining Area, Inner Mongolia have been submitted to the National Energy Bureau for approval. The Company isalso in the process of applying for the consultation letters on preparatory works for Nalin River No. 2 Coal Mine andMuduchaideng Coal Mine in Inner Mongolia. We expect to obtain approval for the three million tons/year coal-baseddimethyl ether coal chemical project in Ordos by the end of 2010 upon determination of Hulusu coal field area andobtaining approval for preliminary land examination. We are in the process of applying for, among others, approval ofthe renovation and expansion of Shaqu Coal Mine and the construction of Xiaohuigou Coal. The construction of PingshuoEast Open Pit Mine and the renovation and expansion work of Kongzhuang Mine are in progress. Projects such asAntaibao Underground Mine and the 250,000 tons/year methanol in Heilongjiang have passed completion inspection.The steady progresses in the Company’s construction projects will lay a solid foundation for its sustainable growth in thefuture.
STRENGTHENED CAPITAL CAPABILITY TO FINANCE CONSTRUCTION
The Board of the Company has considered and approved the resolution in relation to the change of uses of proceedsfrom A share issue, promptly creating favorable conditions for the efficient use of capital and accelerating constructionprogress of the projects. In addition, the Company strengthened its cooperation with banks and entered into cooperationagreements with commercial banks such as National Development Bank, Industrial and Commercial Bank of China, Bankof China, China Construction Bank and Bank of Communications, obtaining credit facilities totalling RMB206.5 billion.The Company’s outstanding business performance, sufficient operating cash flows and low gearing ratio will enable it toeffectively control its financial risks and provide sufficient funding for its continuous and rapid development.
CHINA COAL ENERGY COMPANY LIMITED
10
Interim Report2010
Chairman’s Statement
China’s economy is currently at a critical stage of transitioning from recovery to a sound and steady growth. In thesecond half of 2010, the macroeconomic control of the PRC government will still focus on balancing the different targetsof achieving steady and rapid economic growth, adjusting economic structure and managing inflation expectation.While continuing to implement the proactive fiscal policy and moderately loose monetary policy, the PRC governmentwill also focus on maintaining continuity and stability of its macroeconomic policy, improving its pertinence and flexibilityto enhance sustainable economic development. The continuing steady growth of China’s economy will stabilize thesupply of and demand for energy in China, although the growth of energy demand may slow down. China Coal Energywill closely monitor current macroeconomic conditions and plan in advance to adopt effective measures. In the secondhalf of 2010, the Company will focus on the following tasks:
— strictly implementing safe production management to ensure steady production and operation
— improving operational management and control to achieve its annual operational goals
— strictly implementing accountability system to speed up construction of key projects and
— further strengthening science and technology innovation to form new competitive edge.
Dear shareholders, on behalf of the Board, I would like to express sincere appreciation to all shareholders for your long-
term support and affection for the Company. In the first half of 2010, China Coal Energy has achieved encouraging
results by overcoming difficulties through joint efforts. In the second half of 2010, the Company will continue to strive
for favorable results to create value and return for shareholders.
Wang AnChairman
13 August, 2010
CHINA COAL ENERGY COMPANY LIMITED
11
Interim Report2010
Management Discussion and Analysis ofFinancial Conditions and Operating Results
The following discussions and analysis should be read in conjunction with the Group’s reviewed financial statements andthe notes thereto. The Group’s financial statements have been prepared in accordance with International FinancialReporting Standards.
I. Overview
In the first half of 2010, China’s macroeconomic conditions continued to improve and its economy maintainedstable and relatively rapid growth. The Group captured market opportunities by organizing its production andoperations in a sensible manner and enhancing the correlation among its production, transportation and sales. As aresult, the Company’s main operational indicators achieved record high. For the six months ended 30 June 2010, theGroup’s total revenue (net of inter-segmental sales) amounted to RMB35.090 billion, representing an increase of54.3% over the same period last year; profit before tax amounted to RMB8.008 billion, representing an increase of31.5% over the same period last year; profit attributable to equity holders of the Company amounted to RMB5.446billion, representing an increase of 25.4% over the same period last year; net cash generated from operating activitiesper share was RMB0.37, representing an increase of RMB0.04 over the same period last year; and basic earnings pershare was RMB0.41, representing an increase of RMB0.08 over the same period last year.
For the six For the sixmonths ended months ended
30 June 30 June2010 2009 Increase/decrease
RMB100 million RMB100 million RMB100 million %(restated)
Revenue 350.90 227.43 123.47 54.3
Profit before tax 80.08 60.90 19.18 31.5
EBIDTA 96.24 71.70 24.54 34.2
Profit attributable to equity holdersof the Company 54.46 43.42 11.04 25.4
Net cash generated from operating activities 48.78 44.26 4.52 10.2
As at 30 June 2010, the gearing ratio (total interest-bearing debts/(total interest-bearing debts + equity)) was 13.8%,representing a decrease of 0.5 percentage point from the beginning of the year.
As at As at30 June 31 December
2010 2009 Increase/decreaseRMB100 million RMB100 million RMB100 million %
Assets 1,162.78 1,048.55 114.23 10.9
Liabilities 373.84 314.12 59.72 19.0
Interest-bearing debts 125.92 122.76 3.16 2.6
Equity 788.94 734.43 54.51 7.4
Equity attributable to equity holdersof the Company 676.75 642.28 34.47 5.4
CHINA COAL ENERGY COMPANY LIMITED
12
Interim Report2010
Management Discussion and Analysis ofFinancial Conditions and Operating Results
II. Operating Results
1 Revenue
(1) Consolidated Revenue
For the six months ended 30 June 2010, the Group’s total revenue (net of inter-segmental sales) increased by54.3% to RMB35.090 billion from RMB22.743 billion for the six months ended 30 June 2009. The revenuefrom three major operating segments, coal operations, coking operations and coal mining equipmentoperations had a relatively significant increase from the same period last year.
Changes in revenue net of inter-segmental sales from the Group’s four operating segments of coal, coking,coal mining equipment and other operations for the six months ended 30 June 2010 in comparison with thesix months ended 30 June 2009 were set out as follows:
For the six For the sixmonths ended months ended
30 June 2010 30 June 2009 Increase/decreaseRMB100 million RMB100 million RMB100 million %
(restated)
Coal operations 278.79 172.38 106.41 61.7
Coking operations 25.16 13.95 11.21 80.4
Coal mining equipment operations 30.42 25.63 4.79 18.7
Other operations 16.53 15.47 1.06 6.9
Total 350.90 227.43 123.47 54.3
The proportion of revenue in the Group’s total revenue net of inter-segmental sales generated by variousoperating segments of the Group for the six months ended 30 June 2010 and the six months ended 30 June2009 were set out as follows:
For the six For the sixmonths ended months ended Increase/
30 June 2010 30 June 2009 decrease(restated) (percentage
% % points)
Coal operations 79.4 75.8 3.6
Coking operations 7.2 6.1 1.1
Coal mining equipment operations 8.7 11.3 -2.6
Other operations 4.7 6.8 -2.1
CHINA COAL ENERGY COMPANY LIMITED
13
Interim Report2010
Management Discussion and Analysis ofFinancial Conditions and Operating Results
(2) Segmental Revenue
• Coal operations
The major coal products of the Group were thermal coal and coking coal. Revenue from the coal operationswas mainly generated from selling coal produced from our own coal mines and coal washing plants(sales of self-produced commercial coal) to domestic and overseas customers. In addition, the Group alsopurchased coal from external coal enterprises for resale to customers (sales of proprietary coal trading)and it was also engaged in coal import and export agency services.
For the six months ended 30 June 2010, the total revenue from coal operations of the Group increasedby 61.8% to RMB28.082 billion from RMB17.357 billion for the six months ended 30 June 2009; revenuenet of other inter-segmental sales increased by 61.7% to RMB27.879 billion from RMB17.238 billion forthe six months ended 30 June 2009.
For the six months ended 30 June 2010, the Group’s revenue from sales of self-produced commercialcoal was RMB21.584 billion, representing an increase of RMB5.941 billion or 38.0% over the sameperiod last year, among which, revenue net of other inter-segmental sales was RMB21.381 billion,representing an increase of RMB5.857 billion or 37.7% over the same period last year; sales revenuefrom proprietary coal trading was RMB6.477 billion, representing an increase of RMB4.780 billion or281.7% over the same period last year; revenue from coal import and export agency services was RMB21million, representing an increase of RMB4 million or 23.5% over the same period last year.
CHINA COAL ENERGY COMPANY LIMITED
14
Interim Report2010
Management Discussion and Analysis ofFinancial Conditions and Operating Results
Changes in the Group’s coal sales volume and selling price for the six months ended 30 June 2010 incomparison with the six months ended 30 June 2009 were set out as follows:
For the six months For the six monthsended 30 June 2010 ended 30 June 2009 Increase/decrease
Sales volume Selling price Sales volume Selling price Sales volume Selling price(10,000 tons) (RMB/ton) (10,000 tons) (RMB/ton) (10,000 tons) (RMB/ton)
I. Self-produced Total 4,616 463 3,670 423 946 40commercial coal
(I) Thermal coal 4,563 454 3,611 415 952 39
1. Export 73 638 58 533 15 105
(1) Long-term contract 72.3 634 58 533 14.3 101
(2) Spot trading 0.3 1,458 ☆ ☆ 0.3 —
2.Domestic sales 4,490 451 3,553 414 937 37
(1) Long-term contract 3,121 423 3,070 415 51 8
(2) Spot trading 1,369 513 483 403 886 110
(II) Coking coal 53 1,293 59 874 -6 419
1. Export ☆ ☆ ☆ ☆ — —
2. Domestic sales 53 1,293 59 874 -6 419
II. Proprietary coal trading Total 1,123 576 295 576 828 —
(I) Self-operated exports 1* 2,968 1* 3,009 — -41
1. Long-term contract ☆ ☆ ☆ ☆ — —
2. Spot trading 1* 2,968 1* 3,009 — -41
(II) Domestic resale 1,008 587 259 572 749 15
1. Long-term contract 785 543 78 540 707 3
2. Spot trading 223 742 181 586 42 156
(III) Import trading 107 461 35 568 72 -107
1. Long-term contract 26 401 ☆ ☆ 26 —
2. Spot trading 81 480 35 568 46 -88
(IV) Transhipment trade 7 568 ☆ ☆ 7 —
1. Long-term contract ☆ ☆ ☆ ☆ — —
2. Spot trading 7 568 ☆ ☆ 7 —
III. Import and export agency Total 194 11★ 148 12★ 46 -1
(I) Import agency ☆ ☆ 7 1★ -7 —
(II) Export agency 194 11★ 141 12★ 53 -1
☆ : Nil*: Briquette export★ : Agency service fee
CHINA COAL ENERGY COMPANY LIMITED
15
Interim Report2010
Management Discussion and Analysis ofFinancial Conditions and Operating Results
• Coking operations
The Group’s revenue from coking operations increased from RMB1.395 billion for the six months ended 30 June2009 to RMB2.516 billion (generated entirely from revenue of external sales) for the six months ended 30 June 2010,representing an increase of 80.4%. This was mainly due to the increase in both the sales volume and selling price ofcoke during the reporting period compared to the same period last year. For the six months ended 30 June 2010, theGroup’s revenue from coke sales amounted to RMB2.155 billion, representing an increase of RMB834 million overthe same period last year.
Changes in the sales volume and selling price of coke of the Group were set out in the table below:
For the six months ended For the six months ended30 June 2010 30 June 2009 Increase/decrease
Sales volume Selling price Sales volume Selling price Sales volume Selling price(10,000 tons) (RMB/ton) (10,000 tons) (RMB/ton) (10,000 tons) (RMB/ton)
Self-produced 108.5 1,614 93.4 1,346 15.1 268
Domestic sales 108.5 1,614 93.4 1,346 15.1 268
Exports ☆ ☆ ☆ ☆ — —
Proprietary trading 18.6 2,145 4.2 1,524 14.4 621
Domestic sales 9.8 1,831 4.0 1,509 5.8 322
Exports 8.8 2,552 0.2 1,848 8.6 704
Export agency 0.2 34★ ☆ ☆ 0.2 —
☆ : Nil★ : Agency service fee
The Group’s revenue from methanol, coal tar, crude benzol, etc. in the coking operations of the Group (excludingcoke sales) amounted to RMB361 million for the six months ended 30 June 2010, representing an increase ofRMB287 million over the same period last year. The 0.25 million tons/year methanol project of China Coal LonghuaCompany of the Group in Heilongjiang was completed and came into operation during the first half of 2010,generating a self-produced methanol sales of 0.077 million tons. In the meantime, to avoid competition, as requiredby the undertakings made by China Coal Group upon the listing of the A share of the Company, all the methanolproducts produced by China Coal Longhua of China Coal Group were sold externally via the Group, resulting in anincrease of 0.0388 million tons in sales volume of methanol after the 0.25 million tons/year methanol project inHeilongjiang was put into operations. In the first half of 2010, the Group’s sales volume of methanol amounted to0.1158 million tons with a comprehensive selling price of RMB1,651/ton and sales revenue of RMB191 million.
CHINA COAL ENERGY COMPANY LIMITED
16
Interim Report2010
Management Discussion and Analysis ofFinancial Conditions and Operating Results
• Coal mining equipment operations
The Group’s revenue from the coal mining equipment operations increased from RMB2.803 billion for the six monthsended 30 June 2009 to RMB3.383 billion for the six months ended 30 June 2010, representing an increase of20.7%, of which the revenue after net of other inter-segmental sales increased from RMB2.563 billion for the sixmonths ended 30 June 2009 to RMB3.042 billion for the same period of 2010, representing an increase of 18.7%.The increase was mainly attributable to the increase in the production and sales volume of coal mining equipmentproducts over the same period last year.
• Other operations
For the six months ended 30 June 2010, the Group’s total revenue from operations such as sales of primary aluminumand power generation decreased from RMB1.947 billion for the six months ended 30 June 2009 to RMB1.901billion, representing a decrease of 2.4%, of which the revenue after net of other inter-segmental sales increasedfrom RMB1.547 billion for the six months ended 30 June 2009 to RMB1.653 billion, representing an increase of6.9%.
2 Cost of sales
1. Consolidated cost of sales
For the six months ended 30 June 2010, the Group’s cost of sales increased from RMB16.146 billion for the sixmonths ended 30 June 2009 to RMB25.759 billion, representing an increase of 59.5%.
Materials costs increased from RMB7.545 billion for the six months ended 30 June 2009 to RMB14.064 billion,representing an increase of 86.4%. The increase was mainly attributable to the increase in the Group’s sales volumeof proprietary coal trading and the corresponding increase in materials consumption as a result of its expansion ofproduction.
Staff costs increased from RMB1.519 billion for the six months ended 30 June 2009 to RMB1.873 billion, representingan increase of 23.3%. The increase was mainly attributable to the increase in the number of employees due to theGroup’s production expansion, as well as the corresponding adjustment of staff wages in line with its operationalgrowth, resulting in the increase of staff wages, social insurance and employee benefits accordingly.
Depreciation and amortization expenses increased from RMB806 million for the six months ended 30 June 2009 toRMB1.282 billion, representing an increase of 59.1%. The increase was mainly attributable to more utilization ofnew production equipments and facilities as a result of the Group’s expansion of production.
Repair and maintenance costs decreased from RMB317 million for the six months ended 30 June 2009 to RMB314million, representing a decrease of 0.9%.
Transportation costs increased from RMB3.261 billion for the six months ended 30 June 2009 to RMB4.377 billion,representing an increase of 34.2%. The increase was mainly attributable to the significant increase in the productionvolume of coal during the reporting period compared to the same period last year, resulting in the correspondingincrease in the Group’s coal sales volume which bore transportation costs.
CHINA COAL ENERGY COMPANY LIMITED
17
Interim Report2010
Management Discussion and Analysis ofFinancial Conditions and Operating Results
Sales taxes and surcharges increased from RMB444 million for the six months ended 30 June 2009 to RMB691 million,representing an increase of 55.6%. The increase was mainly attributable to the increase in corresponding taxes andsurcharges as a result of the increase in the Group’s coal production and sales volume and sales gross profit.
Other expenses increased from RMB2.254 billion for the six months ended 30 June 2009 to RMB3.158 billion, representingan increase of 40.1%. The increase was mainly attributable to the corresponding increase of expenses incurred inrelation to coal mining, such as the environmental restoration expenses, sustainable development fund and resourcescompensation charges as a result of the increase of coal mining activities or production and sales volumes.
2. Segmental cost of sales
• Coal operations
Cost of sales for the Group’s coal operations increased from RMB11.423 billion for the six months ended 30 June2009 to RMB19.636 billion for the six months ended 30 June 2010, representing an increase of 71.9%. Changes inthe major cost items were set out as follows:
Items For the For the six months ended six months ended
30 June 2010 30 June 2009 Increase/decreaseRMB100 million RMB100 million RMB100 million %
Materials costs 93.06 39.99 53.07 132.7
Of which: externally purchased rawmaterials preparation cost 8.67 7.20 1.47 20.4
proprietary trading coal cost 63.04 16.68 46.36 277.9
Labor costs 14.04 11.31 2.73 24.1
Depreciation and amortization 10.15 5.84 4.31 73.8
Repair expenses 2.80 2.82 -0.02 -0.7
Transportation costs 41.79 31.54 10.25 32.5
Coal sustainable development fund 7.16 5.64 1.52 27.0
Outsourcing mining engineering fee 6.84 6.51 0.33 5.1
Sales taxes and surcharges 6.35 4.06 2.29 56.4
Others 14.17 6.52 7.65 117.3
Total operating costs for coal operations 196.36 114.23 82.13 71.9
CHINA COAL ENERGY COMPANY LIMITED
18
Interim Report2010
Management Discussion and Analysis ofFinancial Conditions and Operating Results
For the six months ended 30 June 2010, the Group’s cost of sales of self-produced commercial coal was RMB13.332billion, representing an increase of RMB3.577 billion or 36.7% over the same period last year. Unit cost of sales ofself-produced commercial coal was RMB288.83/ton, representing an increase of RMB6.01/ton or 2.1% compared toRMB282.82/ton for the year ended 31 December 2009 and representing an increase of RMB23.02/ton or 8.7%compared to RMB265.81/ton for the six months ended 30 June 2009. The increase was mainly attributable to (i) theincrease in open pit mine stripping expenses incurred during the period which were included into the costs resultingin the increase of RMB3.37/ton in the unit cost of sales of self-produced commercial coal to guarantee continuousgrowth in production volume and sustained production; (ii) the increase of RMB12.39/ton in unit cost of sales of self-produced commercial coal as a result of various factors such as the increase in raw materials (diesel and tyre,etc.)price, the increase in utilization of production equipments and facilities, and the increase in the environmentalrestoration expenses, resources compensation charges and engineering expenses for small and medium projects; (iii)the increase in the unit transportation costs of RMB4.58/ton as a result of the increase of coal sales volume whichbore the settlement of transportation costs; and (iv) the increase in unit sales taxes and surcharges of RMB2.68/tonas a result of the corresponding increase in sales and production volume and unit sales gross profit.
The major items of the Group’s unit cost of sales of self-produced commercial coal for the six months ended 30 June2010 and the six months ended 30 June 2009 were compared as follows:
Items For the For the six months ended six months ended
30 June 2010 30 June 2009 Increase/decreaseRMB/ton RMB/ton RMB/ton %
Materials costs 65.04 63.51 1.53 2.4
Of which: externally purchased rawmaterials preparation cost 18.78 19.62 -0.84 -4.3
Labor costs 30.42 30.81 -0.39 -1.3
Depreciation and amortization 21.99 15.93 6.06 38.0
Repair expenses 6.06 7.68 -1.62 -21.1
Transportation costs 90.53 85.95 4.58 5.3
Coal sustainable development fund 15.52 15.36 0.16 1.0
Outsourcing mining engineering fee 14.82 17.73 -2.91 -16.4
Sales taxes and surcharges 13.75 11.07 2.68 24.2
Others 30.70 17.77 12.93 72.8
Total unit cost of sales of self-producedcommercial coal 288.83 265.81 23.02 8.7
• Coking operations
The cost of sales of coking operations increased from RMB1.308 billion for the six months ended 30 June 2009 toRMB2.396 billion for the six months ended 30 June 2010, representing an increase of 83.2%, which was mainlyattributable to the increase in both sales volume of coke and purchase costs of coal as raw materials.
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• Coal mining equipment operations
The cost of sales of coal mining equipment operations increased from RMB2.276 billion for the six months ended 30June 2009 to RMB2.710 billion for the six months ended 30 June 2010, representing an increase of 19.1%. Theincrease was mainly attributable to the increase in the sales volume of coal mining equipments resulting in acorresponding increase in costs of sales.
3 Gross profit
For the six months ended 30 June 2010, the Group’s gross profit increased from RMB6.597 billion for the six monthsended 30 June 2009 to RMB9.331 billion, representing an increase of 41.4%. The Group’s gross profit margindecreased from 29.0% for the six months ended 30 June 2009 to 26.6% for the six months ended 30 June 2010,representing a decrease of 2.4 percentage points over the same period last year, which was mainly attributable tothe significant increase in sales volume of proprietary coal trading with lower gross profit margin and its correspondingincrease in proportion.
The gross profit and gross profit margins of the Group’s various operating segments for the six months ended 30June 2010 and for the six months ended 30 June 2009 were as follows:
Gross profit Gross profit margin
For the For the For the For thesix months six months six months six months
ended ended Increase/ ended ended Increase/30 June 2010 30 June 2009 decrease 30 June 2010 30 June 2009 decrease
RMB100 RMB100 RMB100 (restated) (percentagemillion million million points)
(restated) % %
Coal operations 84.46 59.34 25.12 30.1 34.2 -4.1
Of which: Self-produced commercial coal 82.52 58.88 23.64 38.2 37.6 0.6
Proprietary coal trading 1.73 0.29 1.44 2.7 1.7 1.0
Coking operations 1.20 0.87 0.33 4.8 6.2 -1.4
Coal mining equipment operations 6.73 5.27 1.46 19.9 18.8 1.1
Other operations 1.90 0.74 1.16 10.0 3.8 6.2
The Group 93.31 65.97 27.34 26.6 29.0 -2.4
Note: The above gross profit and gross profit margins of each operating segment are figures before netting of inter-segmentalsales.
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Management Discussion and Analysis ofFinancial Conditions and Operating Results
4 Selling, general and administrative expenses
For the six months ended 30 June 2010, the Group’s selling, general and administrative expenses increased fromRMB1.240 billion for the six months ended 30 June 2009 to RMB1.631 billion, representing an increase of 31.5%.The increase was mainly attributable to the increase in the number of employees as a result of the Group’s expansionof production and the increase in staff remuneration of RMB261 million over the same period last year as a result ofthe corresponding adjustment of the staff wages in line with the operational growth; there was also an increase inasset impairment losses of RMB193 million over the same period last year, as certain subsidiaries of the Group madeprovisions for impairment losses for some assets under the changing market conditions, while the provisions for theimpairment losses were reversed during the same period last year.
5 Other income
For the six months ended 30 June 2010, the Group’s other income decreased from RMB813 million for the sixmonths ended 30 June 2009 to RMB315 million, representing a decrease of 61.3%. The decrease was mainlyattributable to the investment gains realized from disposal of its A shares holdings in China COSCO Holdings CompanyLimited during the same period last year whereas there were no such gains during the reporting period, a decreasein government grant and subsidy and a decrease in deposit interest income compared to the same period last year.
6 Other gains, net
For the six months ended 30 June 2010, the other net gains of the Group increased by 247.3% to RMB257 millionfrom RMB74 million for the six months ended 30 June 2009, which was mainly attributable to the recognition ofother gains of RMB278 million for the excess of identifiable net asset fair value acquired over consideration paid forthe shares of Xiaohuigou Coal acquired by the Group during the reporting period whereas there was no such incomeduring the same period last year.
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Management Discussion and Analysis ofFinancial Conditions and Operating Results
7 Profit from operations
The Group’s profit from operations increased from RMB6.244 billion for the six months ended 30 June 2009 toRMB8.271 billion for the six months ended 30 June 2010, representing an increase of 32.5%. Changes in profit fromoperations for various operating segments were as follows:
For the six For the sixmonths ended months ended
30 June 2010 30 June 2009 Increase/decreaseRMB100 million RMB100 million RMB100 million %
(restated)
Coal operations 78.48 53.26 25.22 47.4
Coking operations 0.05 0.36 -0.31 -86.1
Coal mining equipment operations 2.88 2.55 0.33 12.9
Other operations 1.05 0.97 0.08 8.2
Note: The above profit from operations for all the above operating segments are the figures before netting of inter-segmentalsales.
8 Finance costs, net
The Group’s net finance costs increased from RMB168 million for the six months ended 30 June 2009 to RMB279million for the six months ended 30 June 2010, representing an increase of 66.1%, which was mainly attributable toan exchange loss of RMB53 million on the Group’s borrowings denominated in Japanese Yen due to the strengtheningof Japanese Yen against RMB during the reporting period, as compared to an exchange gain of RMB105 million forthe same period last year.
9 Profit before tax
The Group’s profit before tax increased from RMB6.090 billion for the six months ended 30 June 2009 to RMB8.008billion for the six months ended 30 June in 2010, representing an increase of 31.5%.
10 Income tax expenses
The Group’s income tax expenses increased from RMB1.492 billion for the six months ended 30 June 2009 toRMB2.035 billion for the six months ended 30 June 2010, representing an increase of 36.4%.
11 Profit attributable to equity holders of the Company
Profit attributable to equity holders of the Company increased from RMB4.342 billion for the six months ended 30June 2009 to RMB5.446 billion for the six months ended 30 June 2010, representing an increase of 25.4%.
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Management Discussion and Analysis ofFinancial Conditions and Operating Results
III. Cash Flow
As at 30 June 2010, the Group had cash and cash equivalents amounting to RMB12.663 billion, representing anincrease of RMB35 million as compared to the cash and cash equivalents of RMB12.628 billion as at 31 December2009 (including an increase of RMB one million due to exchange gains).
Net cash generated from operating activities increased from RMB4.426 billion for the six months ended 30 June2009 to RMB4.878 billion for the six months ended 30 June 2010, representing an increase of 10.2%. This wasmainly attributable to an increase of RMB1.161 billion in cash generated from operations as compared to the sameperiod last year due to the expanding of operations, a decrease of RMB1.224 billion in cash inflow from interestincome as compared to the same period last year, a decrease of RMB18 million in cash outflow for interests paymentas compared to the same period last year, and a decrease of RMB498 million in cash outflow for the payment ofincome tax as compared to the same period last year.
Net cash used in investing activities increased from RMB4.379 billion for the six months ended 30 June 2009 toRMB4.955 billion for the six months ended 30 June 2010, representing an increase of 13.2%, which was mainlyattributable to a significant increase in cash outflow for the Group’s purchase of property, plant and equipment fordevelopment of its core businesses, as well as for the equity acquisition as compared to the same period last year.The increase in net cash used in investing activities were partially offset by a decrease in the funds used for termdeposits with initial terms exceeding three months during the period as compared to the same period last year.
Net cash flow generated from financing activities decreased from RMB1.266 billion for the six months ended 30 June2009 to RMB111 million for the six months ended 30 June 2010, representing a decrease of 91.2%, which wasmainly attributable to a significant decrease in the net increase of the Group’s borrowings incurred during thereporting period as compared to the same period last year.
IV. Liquidity and Sources of Capital
For the six months ended 30 June 2010, the Group’s funds were mainly derived from proceeds generated frombusiness operations, bank loans and net amounts of funds raised in capital markets. The Group’s funds were mainlyused for investments in purchasing production facilities and equipments for coal, coal chemical and coal miningequipment operations and acquisition of coal resources, for repayment of debts owed by the Group, and as theGroup’s working capital and general recurring expenditures.
The cash generated from the Group’s self-operated business, the net proceeds from share offering in the global anddomestic capital markets, and the relevant banking facilities obtained will ensure the sufficiency of capital fundsavailable for future production and operation activities as well as project construction.
V. Assets and Liabilities
1 Property, plant and equipment
The net value of property, plant and equipment of the Group increased from RMB36.729 billion as at 31 December2009 to RMB39.791 billion as at 30 June 2010, representing an increase of RMB3.062 billion or 8.3%.
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2 Mining rights
As at 30 June 2010, the net value of the Group’s mining rights amounted to RMB15.866 billion, increased byRMB3.690 billion or 30.3% as compared to RMB12.176 billion as at 31 December 2009. This was mainly due to theincrease in the net book value of the mining rights by RMB3.585 billion after acquisition of the equity interest ofXiaohuigou Coal by the Group during the reporting period.
3 Trade and note receivables
As at 30 June 2010, the net amount of trade and note receivables of the Group amounted to RMB7.907 billion,representing an increase of RMB2.943 billion or 59.3% compared to the net amount of RMB4.964 billion as at 31December 2009, of which, the net amount of trade receivables amounted to RMB5.927 billion, representing anincrease of RMB2.672 billion or 82.1% as compared to the net amount of RMB3.255 billion as at 31 December2009. The increase was mainly attributable to the increase of trade receivables as a result of the Company’s increasein sales volume. Trade receivables aged within six months amounted to RMB5.198 billion, representing an increaseof RMB2.442 billion, or 88.6%, as compared to RMB2.756 billion as at 31 December 2009.
4 Borrowings
As at 30 June 2010, the balance of borrowings of the Group amounted to RMB12.592 billion, representing a netincrease of RMB316 million or 2.6% as compared to RMB12.276 billion as at 31 December 2009, of which thebalance of long-term borrowings (including the portion due within one year) was RMB12.196 billion, representing anet increase of RMB307 million as compared to the balance of RMB11.889 billion as at 31 December 2009, and thebalance of short-term borrowings amounted to RMB396 million, representing a net increase of RMB9 million ascompared to the balance of RMB387 million as at 31 December 2009.
VI. Significant Investment
For the six months ended 30 June 2010, the Group had no new significant investment.
VII. Material Acquisition and Disposal
For details of acquisitions and disposals, please refer to the section of “Assets Transaction” in this report.
VIII. Exchange Rate Risks
The business operations of the Group are affected by fluctuations in the exchange rate of Renminbi as the Groupreceives the United States dollar for most of its export sales and its liabilities are denominated in foreign currencies,including Japanese Yen and the United States dollar. In the meanwhile, the Group also uses foreign currencies,mainly including United States dollar to pay for imported coal, equipments and spare parts. Therefore, exchange ratefluctuation of foreign currencies against the Renminbi may have favorable or adverse effects on the operating resultsof the Group. The appreciation of Renminbi will lead to a decline in the revenue from exports, but will also decreasethe cost of equipments and spare parts imported by the Group, and decrease the cost for the repayment of foreigndebts.
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Management Discussion and Analysis ofFinancial Conditions and Operating Results
IX.Commodity Price Risks
The Group is also subject to commodity price risks arising from movement in the prices of its products and materials.
X. Industry Risks
Like other coal companies and coking companies in China, the Group’s operational activities are subject to regulationsby the Chinese government in aspects such as industry policies, project approvals, granting of permits, industryspecific taxes and surcharges, environmental protection and safety standards. Therefore the Group may be constrainedin expanding business or increasing earnings. Future policies to be adopted by the Chinese government in industriesrelevant to the Group’s businesses such as coal and coal chemical may have an impact on the Group’s operations.
XI.Contingent Liabilities
1 Bank guarantees
As at 30 June 2010, the Group provided a guarantee of RMB550 million to secure the bank borrowings of ShanxiPingshuo Gangue-fired Power Generation Co., Ltd., an associate of the Group, in proportion to the Group’sshareholdings in it.
2 Environmental protection responsibilities
Environmental protection laws and regulations are in full force in China. However, the management of the Group isof the opinion that other than those that have been accounted for in the financial statements, there does notcurrently exist any other environmental protection liabilities that may have material adverse impact on the financialposition of the Group.
3 Contingent legal liability
During the reporting period, the Company was not involved in any material litigation or arbitration, and to theknowledge of the Company, there is no material litigation or arbitration pending or threatened against or involvingthe Company.
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Business Performance
I. COAL OPERATIONS
In the first half of 2010, the Company seized the opportunities arising from strong demands in the coal markets, fullyleveraged on the coal production capacities, reasonably arranged the continuation of production, and ensured abalanced and stable production, which resulted in the rapid growth of the production volume of raw coal over thesame period last year. The Company also continuously strengthened coordination among production, transportationand sales, and proactively adjusted products, customers structure and market flow, which resulted in the substantialincrease of coal sales and the satisfactory operating results of coal operations.
• An increase of 26.9% in raw coal production over the same period last year
In the first half of 2010, the Company’s raw coal production was 62.26 million tons, representing an increase of13.20 million tons or 26.9% over the same period last year. By mining areas, coal production of the majormining areas maintained substantial growth, among which, Pingshuo Mining Area’s raw coal production was53.24 million tons, representing an increase of 10.59 million tons or 24.8% over the same period last year,which was attributable to its reasonable arrangement on the continuation of production and the improvementon utilization rate of large equipments. Datun Mining Area’s raw coal production increased by 14.5% over thesame period last year, which was attributable to the strengthening of on-site management, the strictimplementation of various production measures and continuous improvement of unit output and unit advancinglevel of mining and road heading faces. Liliu Mining Area, Dongpo Coal Mine and Nanliang Coal Mine activelyleveraged on the production capacities, as a result of which raw coal production increased by 107.6%, 136.8%and 49.3% respectively over the same period last year.
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Business Performance
Raw Coal Production January to January to(10 thousand tons) June, 2010 June, 2009 Change%
Pingshuo Mining Area 5,324 4,265 24.8
Of which: Antaibao Open Pit Mine 1,253 1,125 11.4
Anjialing Open Pit Mine 1,173 1,372 -14.5
Anjialing No. 1Underground Mine 796 833 -4.4
Anjialing No. 2Underground Mine 950 744 27.7
Antaibao Underground Mine 540 191 182.7
Jingdong Mine 612 — —
Datun Mining Area 504 440 14.5
Of which: Yaoqiao Mine 245 216 13.4
Kongzhuang Mine 82 71 15.5
Xuzhuang Mine 108 88 22.7
Longdong Mine 69 66 4.5
Liliu Mining Area 137 66 107.6
Dongpo Coal Mine 161 68 136.8
Nanliang Coal Mine 100 67 49.3
Total 6,226 4,906 26.9
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Business Performance
• An increase of 44.2% in commercial coal sales over the same period last year
In the first half of 2010, there was a general balance between supply and demand in the domestic coal marketsand the demands in the international coal markets recovered to some extent. The Company mitigated theeffects caused by unfavorable factors (such as frequent closures of ports and repairment and maintenance onDaqin Railway Line) on operations, adhered to the “market-oriented and customer-focused” operation philosophy,enhanced the coordination and communication among departments and units, and timely identified, traced andresolved problems in the course of production, transportation and sales, which helped the stable improvementof marketing efforts. The Company’s total commercial coal sales amounted to 59.33 million tons, representingan increase of 18.20 million tons or 44.2% over the same period last year.
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Business Performance
— An increase of 25.8% in self-produced coal sales over the same period last year
In the first half of 2010, the Company’s self-produced coal sales amounted to 46.16 million tons, representingan increase of 9.46 million tons or 25.8% over the same period last year, of which domestic sales was 45.43million tons, representing an increase of 25.8% over the same period last year, and export sales was 0.73 milliontons, representing an increase of 25.9% over the same period last year.
— Multiple fold increase in proprietary coal trading
The Company actively expanded proprietary coal trading and broadened the market growth prospect of theCompany’s future coal production capacity through capturing existing markets. In the first half of 2010, theCompany recorded proprietary coal trading of 11.23 million tons, representing an increase of 8.28 million tonsor 2.8 times over the same period last year. Proprietary coal trading accounted for 18.9% of the total sales,representing an increase of 11.6 percentage points over the same period last year, of which domestic sales was10.08 million tons, representing an increase of 2.9 times over the same period last year, and import sales was1.07 million tons, representing an increase of 2.1 times over the same period last year.
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Business Performance
— Substantial increase in export agency sales
In the first half of 2010, the Company’s export agency sales amounted to 1.94 million tons, representing anincrease of 0.53 million tons or 37.6% over the same period last year.
January to January toCommercial Coal Sales (10 thousand tons) June, 2010 June, 2009 Change%
Total 5,933 4,113 44.2
(1) Domestic sales of self-produced coal 4,543 3,612 25.8
By region: North China 1,213 929 30.6
East China 1,766 1,805 -2.2
South China 625 450 38.9
Northeast China 37 — —
Other 902 428 110.7
By coal type: Thermal coal 4,490 3,553 26.4
Coking coal 53 59 -10.2
By contract: Long-term contract 3,140 3,076 2.1
Spot trading 1,403 536 161.8
By transportation: Seaborne 3,030 1,926 57.3
Direct arrival 696 1,307 -46.7
Local sales 817 379 115.6
(2) Self-produced coal export 73 58 25.9
By region: Taiwan, China 58 29 100.0
Korea 12 19 -36.8
Japan 3 10 -70.0
By coal type: Thermal coal 73 58 25.9
Coking coal — — —
By contract: Long-term contract 72.3 58 24.7
Spot trading 0.3 — —
(3) Domestic trading 1,008 259 289.2
By contract: Long-term contract 785 78 906.4
Spot trading 223 181 23.2
(4) International trading 309 184 67.9
Of which: Proprietary trading 115 36 219.4
Import agency — 7 -100.0
Export agency 194 141 37.6
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Business Performance
• Stable increase in coal sales price
In the first half of 2010, the average sales price of the Company’s self-produced commercial coal was RMB463/ton,representing an increase of RMB40/ton or 9.5% over the same period last year. The average domestic sales price ofself-produced thermal coal was RMB451/ton, representing an increase of RMB37/ton or 8.9% over the sameperiod last year. The average domestic sales price of self-produced coking coal was RMB1,293/ton, representing anincrease of RMB419/ton or 47.9% over the same period last year. The average export price of self-producedthermal coal was RMB638/ton, representing an increase of RMB105/ton or 19.7% over the same period last year.
The average domestic sales price under long-term contract of self-produced thermal coal was RMB423/ton,representing an increase of RMB8/ton or 1.9% over the same period last year. The average domestic price ofspot sales was RMB513/ton, representing an increase of RMB110/ton or 27.3% over the same period last year.
• An increase in the proportion of spot sales of self-produced coal
In the first half of 2010, the spot sales of self-produced coal amounted to 14.03 million tons, accounting for 30.4%of self-produced coal sales and representing an increase of 15.8 percentage points over the same period last year.
II. COKING OPERATIONS
In the first half of 2010, the overall domestic demand for coke was weak, which was mainly due to the productioncapacity surplus of coke industry and a depression in demand from downstream steel industry. Although the salesprice of coke was higher than that of the same period last year, the price of coal as raw materials for producing cokeincreased substantially, which resulted in a decrease of profit margin and difficulties of operation in coke industry. Inthe second half of 2010, the Company will closely monitor market changes, make adjustments to its operationstrategies, implement flexible measures to restrict production and strive to mitigate the negative effects on theCompany’s operational results.
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Business Performance
In the first half of 2010, the Company’s coke production amounted to 1.11 million tons, representing an increase of23.3% over the same period last year. Coke sales amounted to 1.273 million tons, representing an increase of29.6% over the same period last year. The weighted average sales price for domestic self-produced coke wasRMB1,614/ton, representing an increase of 19.9% over the same period last year. The weighted average sales pricefor proprietary coke was RMB2,145/ton, representing an increase of 40.7% over the same period last year, of whichdomestic and export sales price increased by 21.3% and 38.1% respectively.
During the reporting period, the Company’s Heilongjiang Methanol Project with a production capacity of 250,000tons/year commenced production and the Company produced 77,000 tons and sold 116,000 tons of methanol inthe first half of 2010, at an average sales price of RMB1,651/ton. (Please see “Management Discussion and Analysisof Financial Conditions and Operating Results” for the reason why sales volume exceeded production volume.)
III. COAL MINING EQUIPMENT OPERATIONS
As the construction of domestic large coal mines and the integration of local coal mines were further carried out, themechanization rate of coal mining was further increased and the market demand for coal mining equipments continuedto increase. In the first half of 2010, the Company’s total production value of coal mining equipment operations wasRMB3.86 billion, representing an increase of RMB0.79 billion or 25.7% over the same period last year. The productionvolume of coal mining equipments reached 162,000 tons, representing an increase of 36.1% over the same periodlast year, of which 10,569 units (sets) were major coal mining equipments. The total value of newly-signed salescontracts amounted to RMB4.73 billion, representing an increase of 54.7% over the same period last year.
IV. OTHER OPERATIONS
In the first half of 2010, the production volume of the Company’s primary aluminum was 55,000 tons, representingan increase of 7.8% over the same period last year. Electricity generated was 2.37 billion kwh, representing anincrease of 52.2% over the same period last year.
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Investor Relations
China Coal Energy always highly values the management of investor relations, considering it as part of the Company’soverall strategic management. The Company’s management of investor relations aims to, on the basis of ensuringstandardized and sufficient information disclosure, increase investors’ recognition of the Company’s values throughaccurate, timely and consistent bilateral communication with investors and analysts in respect of the Company’s strategicplanning, corporate governance, operating results, financial conditions and prospects, and convey the information fromthe capital market to the management so as to continue promoting the transparency of our corporate governance,increasing investors’ recognition of the Company and eventually maximize the interests of our shareholders and enhancethe Company’s inherent values.
In the first half of 2010, the Company strived to ensure the timely, fair, accurate, true and complete disclosure ofinformation in strict compliance with the information disclosure requirements for listed companies imposed by relevantregulatory authorities. Depending on the types of audience, the Company had sufficient all-round exchange andcommunication with domestic and overseas investors via flexible and versatile means. The Company organized variouskinds of meetings with a total number of 163 and met 582 attendees totally, of which 6 were results briefingteleconferences involving 75 attendees, participated in 24 investment fora organized by ten securities firms involving217 attendees, held 133 investors’ visit and teleconferences with 290 attendees. The multidimensionally smooth investorcommunication platform has effectively enhanced the capital market’s understanding and recognition of the Company.
List of investor relations activities in the first half of 2010
Number ofActivities Time Type Name of activity Session(s) attendees
Major activities April 2010 Results briefing teleconferences 6 75
investment Fora January 2010 H Share The ninth UBS Greater China Symposium 3 23
January 2010 H Share Deutsche Bank Access China Conference 2010 3 44
April 2010 H Share Macquarie Chinese Commodities Annual Meeting 1 33
May 2010 H Share The eighth BOCI Investors’ Forum 5 25
May 2010 H Share CLSA China Investment Forum 3 25
May 2010 A Share Orient Securities Investors’ Forum 2010 1 10
May 2010 A Share UBS Securities A-shares Investment Seminar 2 6
May 2010 H Share J. P. Morgan China Investment Forum 2 21
June 2010 A Share Everbright Securities Interim Strategies Meeting 2010 1 13
June 2010 H Share Credit Suisse China Investment Annual Meeting 2010 3 17
Sub-total 24 217
Day-to-day receptions January to A+H Share Investors’ visits and teleconferences 133 290June 2010
Total 163 582
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Investor Relations
When actively conducting external communication, the Company also focuses on the collection of feedback from thecapital market, pays special attention to the advice and suggestions of investors and reports them to the management ofthe Company on a timely basis as important references for the Company’s decisions, which have effectively and continuouslyimproved the Company’s corporate governance.
The Company obtained extensive attention and recognition from the capital market for its longstanding and consistentefforts in improving corporate governance. In the first half of 2010, the 14th annual ranking of the FT Global 500 waspublished by the Financial Times of the UK. China Coal Energy ranked 357th with its total market capitalization ofUS$22.057 billion. Furthermore, China Coal Energy won the 12th (2009) “Top 100 Chinese Listed Companies GoldenBull Award” organized by China Securities Journal and the 100 Most Valuable Main Board Listed Companies Award for2009 organized by Secutimes.
In the first half of 2010, the share price performance of A Shares was the worst among global major stock markets. TheShanghai Composite Index closed at 2398.37, representing a decrease of 26.1% over the beginning of the year. TheHong Kong Hang Seng China Enterprise Index closed at 11466.24, representing a decrease of 10.1% over the beginningof the year. Meanwhile, investors’ concerns about the sharp deterioration of macroeconomics conditions and uncertaintiesin the policy adjustments such as resources tax reform also affected the overall performance of coal-related sector. Theclosing price of China Coal Energy A Share was RMB8.39 per share on 30 June 2010, representing a decrease of 37.7%over the beginning of the year. The closing price of its H Share was HK$9.89 per share, representing a decrease of 29.9%over the beginning of the year.
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Investor Relations
In the second half of 2010, China Coal Energy will continue to adhere to its principles of transparence, integrity, fairness,openness and continue to maintain smooth communication channels with people from all circles, enhance the capitalmarket’s understanding and recognition of the Company so as to obtain more support and attention from investors tomaximize the shareholders’ value.
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Corporate Governance
I. Corporate Governance
During the reporting period, by strictly complying with overseas and domestic laws and regulations and applicablelisting rules, the Company further optimized its corporate governance structure and continuously improved its corporategovernance standard. The Company’s corporate governance had been in compliance with the requirements ofrelevant domestic and overseas regulatory documents including the Principles for Corporate Governance of ListedCompanies promulgated by CSRC and the Listing Rules.
In making critical decisions on major issues and managing the daily operation of the Company, the Company’sgoverning body, decision-making body, supervisory body and the executive body duly discharged their respectiveduties and responsibilities, supported, checked and balanced against each other, and were dedicated to creatingvalues for shareholders and society in accordance with the prescribed responsibilities and functions of the GeneralMeeting of the Shareholders, the Board, the Supervisory Committee and the corporate management.
During the reporting period, the Company convened one general meeting, one board meeting and one supervisorycommittee meeting.
During the reporting period, the Company strictly complied with the Listing Rules and the SSE Listing Rules and the“Information Disclosure Management System” of the Company and by upholding the principle of “being stringentrather than lenient, being abundant rather than scarce”, the Company made periodic reports, provisional reportsand disclosures in a true, accurate, complete and timely manner.
During the reporting period, in accordance with the domestic and overseas regulatory requirements, the Companyissued a total of 77 items of notices, announcements, periodic reports and shareholder circulars on the websites ofHKSE, SSE and the Company. Apart from statutory information disclosure, to increase the transparency of corporategovernance and subject to compliance with overseas and domestic regulatory requirements and ensuring fairness,openness and impartiality, the Company also voluntarily disclosed major productional and operational data monthlythrough its website and the websites of HKSE and SSE respectively, thereby facilitating investors in understandingthe dynamics of corporate operation in time.
During the reporting period, the Company had been independent from China Coal Group in terms of business,staffs, assets and finance.
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Corporate Governance
II. Compliance with the Code on Corporate Governance Practices
The Company always attaches great importance to corporate governance and the enhancement of its corporategovernance transparency. It strengthens its internal control continuously to attain legitimate and efficient operationsin accordance with the requirements of the regulatory authorities on corporate governance, thereby maximizingshareholder returns from sound corporate governance.
During the reporting period, the Company has complied with the principles and code provisions set out in the Codeon Corporate Governance Practices in Appendix 14 of the Listing Rules.
III. Model Code for Securities Transactions by Directors of Listed Issuers
The Company has adopted the “Model Code for Securities Transactions by Directors of Listed Issuers” (the “ModelCode”) as set out in Appendix 10 of the Listing Rules. After having made specific enquiry, the Company confirmedthat each director of the Company had complied with the Model Code during the reporting period.
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Corporate Governance
IV.Board Meetings
During the reporting period, the Board held one meeting.
At the first meeting in 2010 of the First Session of the Board held on 22 April 2010, the following resolutions wereconsidered and approved:
1. “Resolution on Annual Report for 2009 of the Company and its summary, Results Announcement for 2009”;
2. “Resolution on Directors’ Report of the Company for 2009”;
3. “Resolution on Financial Report of the Company for 2009”;
4. “Resolution on Proposed Profit Distribution Plan of the Company for 2009”;
5. “Resolution on Production and Operating Plans of the Company for 2010”;
6. “Resolution on Capital Expenditure Plans of the Company for 2010”;
7. “Resolution on Financial Plans of the Company for 2010”;
8. “Resolution on Remuneration of Directors, Supervisors of the Company for 2010”;
9. “Resolution on Performance Targets for Senior Management of the Company for 2010”;
10. “Resolution on Engaging Auditors to Review Interim Financial Report and Audit Annual Report for 2010”;
11. “Resolution on Report of the Board on the Self-assessment of Internal Control of the Company for 2009”;
12. “Resolution on Social Responsibility Report of the Company for 2009”;
13. “Resolution on Amendments to the Articles of Association and Amendments to the Rules of Procedure forShareholders’ General Meeting”.
14. “Resolution on General Mandates to Issue Shares”.
15. “Resolution on Convening of Annual General Meeting of the Company for 2009”.
16. “Resolution on the First Quarter Report of the Company for 2010”;
During the reporting period, all relevant matters (such as the quorum, convening, holding and voting procedures ofthe meeting) of the Board meeting complied with the relevant provisions of the PRC Company Law and the Articlesof Association. All directors were diligent and responsible, and dedicated to promoting the interests of the Companyand shareholders as a whole.
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Corporate Governance
V. Meetings of Board Committees
(1) Audit Committee
During the reporting period, the audit committee of the Board held one meeting on 21 April 2010, the followingresolutions were considered and approved:
1. “Resolution on Annual Report for 2009 of the Company and its summary, Results Announcement for 2009”;
2. “Resolution on Directors’ Report of the Company for 2009”;
3. “Resolution on Financial Report of the Company for 2009”;
4. “Resolution on Proposed Profit Distribution Plan of the Company for 2009”;
5. “Resolution on Production and Operation Plans of the Company for 2010”;
6. “Resolution on Financial Plans of the Company for 2010”;
7. “Resolution on Engaging Auditors to Review Interim Financial Report and Audit Annual Report for 2010”;
8. “Resolution on Report of the Board on the Self-assessment of Internal Control of the Company for 2009”;
9. “Resolution on the First Quarter Report of the Company for 2010”;
10. The report of PricewaterhouseCoopers and PricewaterhouseCoopers Zhong Tian CPAs Limited Company onthe Audit of Financial Statements of the Company for 2009 was reviewed at the meeting.
The audit committee of the Board has reviewed the interim report of the Company. In addition, the Company’sexternal auditor, PricewaterhouseCoopers, has performed an independent review of the unaudited condensedconsolidated interim financial information of the Company for the six months ended 30 June 2010 in accordancewith the International Standard on Review Engagements 2410, “Review of Interim Financial Information Performedby the Independent Auditor of the Entity” issued by the International Auditing and Assurance Standards Board.On the basis of their review, which does not constitute an audit, PricewaterhouseCoopers confirmed in writingthat nothing has come to their attention which would cause them to believe that the interim financial informationhas not, in any material aspect, been properly prepared in accordance with the International Accounting Standard34 “Interim Financial Reporting”.
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Corporate Governance
(2) Remuneration Committee
During the reporting period, the remuneration committee of the Board held one meeting on 21 April 2010, thefollowing resolutions were considered and approved:
1. “Resolution on Annual Report for 2009 of the Company and its summary, Results Announcement for 2009”;
2. “Resolution on Directors’ Report of the Company for 2009”;
3. “Resolution on Remuneration of Directors, Supervisors of the Company for 2010”;
4. “Resolution on Performance Targets for Senior Management of the Company for 2010”;
(3) Strategic Planning Committee
During the reporting period, the strategic planning committee of the Board held one meeting on 21 April 2010,the following resolutions were considered and approved:
1. “Resolution on Annual Report for 2009 of the Company and its summary, Results Announcement for 2009”;
2. “Resolution on Directors’ Report of the Company for 2009”;
3. “Resolution on Capital Expenditure Plans of the Company for 2010”.
(4) Safety, Health and Environmental Protection Committee
During the reporting period, the safety, health and environmental protection committee of the Board held onemeeting on 21 April 2010, the following resolutions were considered and approved:
1. “Resolution on Annual Report for 2009 of the Company and its summary, Results Announcement for 2009”;
2. “Resolution on Directors’ Report of the Company for 2009”;
3. “Resolution on Social Responsibility Report of the Company for 2009”;
4. The report regarding the status of the Company’s safety, health and environmental protection for 2009 andthe arrangements for 2010 was heard.
(5) Nomination Committee
During the reporting period, the nomination committee of the Board did not convene any meeting.
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Corporate Governance
VI.Supervisory Committee
During the reporting period, the supervisory committee of the Board held one meeting.
At the first meeting in 2010 of the First Session of the Supervisory Committee convened on 22 April 2010, thefollowing resolutions were considered and approved:
1. “Resolution on Annual Report for 2009 of the Company and its summary, Results Announcement for 2009”;
2. “Resolution on Report of the Supervisory Committee of the Company for 2009”;
3. “Resolution on Financial Report of the Company for 2009”;
4. “Resolution on Proposed Profit Distribution Plan of the Company for 2009”;
5. “Resolution on Report of the Board on the Self-assessment of Internal Control of the Company for 2009”;
6. “Resolution on the First Quarter Report of the Company for 2010”.
During the reporting period, each supervisor of the Company had properly performed his supervisory functions withdue diligence and in compliance with the PRC Company Law, the Articles of Association and related provisions.
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Corporate Governance
VII. Management of Connected Transactions
During the reporting period, the Company continued to strengthen connected transaction management, strictlyobserved the various agreements signed with the connected parties and effectively managed connected transactionsin accordance with the requirements of the Listing Rules and the SSE Listing Rules and the “Management Measureson Connected Transactions” of the Company and its enforcement regulations.
The Company has entered into a series of framework agreements of continuing connected transactions with ChinaCoal Group and other connected parties, including the Coal Export and Sales Agency Framework Agreement, CoalSupplies Framework Agreement, Integrated Materials and Services Mutual Provision Framework Agreement, MineConstruction, Mine Design and General Contracting Service Framework Agreement, Mine Design and GeneralContracting Service Framework Agreement, Property Leasing Framework Agreement, Land Use Rights LeasingFramework Agreement, Trademark Licensing Framework Agreement, Coal and other related Products and ServicesSupply Framework Agreements and Railway Leasing and Management Entrustment Service Framework Agreement.During the reporting period, each of the above-mentioned continuing connected transaction has been performed inaccordance with the relevant signed and announced framework agreements and pricing principles.
Concerning each of the continuing connected transactions, the Company has always implemented budgetmanagement, monthly monitoring, early warning for caps and regular consultation system. Through improving themanagement system of the connected transactions, optimizing the organizational structure and strategic staffing, aswell as the adoption of various other management and control measures at all times, the Company further improvedthe connected transaction management and control system, enhanced internal control and ensured the compliancewith legal and regulatory requirements for all connected transactions during the reporting period.
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Interim Report2010
Disclosure of Major Events
I. SHARE CAPITAL STRUCTURE
The Company’s share capital structure as at 30 June 2010 was as follows:
Percentage ofthe total
Class of shares Number of issued shareshares held capital
(Shares) (%)
A Share 9,152,000,400 69.03
of which, China Coal Group held 7,481,643,774 56.43
H Share 4,106,663,000 30.97
of which, China Coal Hong Kong held* 120,000,000 0.91
Total 13,258,663,400 100.00
*: China Coal Hong Kong is an overseas wholly-owned subsidiary of China Coal Group. China Coal Group and China CoalHong Kong aggregately hold 7,601,643,774 shares, representing approximately 57.33% of the total issued share capital ofthe Company.
II. DISTRIBUTION OF FINAL DIVIDENDS FOR 2009
The distribution plan of profits of the Company for 2009 was approved at the Company’s 2009 Annual GeneralMeeting on 25 June 2010. Net profits attributable to the shareholders of the Company in the Company’s consolidatedfinancial statements prepared under the PRC GAAP amounted to RMB6,622,169,000 (the profits after tax stated inthe financial statements prepared under the PRC GAAP and the IFRS, whichever is lower), 30% of which (totallingRMB1,986,650,700) were distributed to the shareholders as cash dividends. The dividends distributed was RMB0.14984(tax inclusive) per share based on the Company’s total issued share capital of 13,258,663,400 shares.
Pursuant to the “Notice Regarding Questions on Withholding Enterprise Income Tax When PRC Resident EnterprisesDistribute Dividend to Foreign Non-resident Enterprise Shareholders of H Shares” (Guo Shui Han [2008] No. 897)issued by the State Administration of Taxation of the PRC, the Company should withhold enterprise income tax at atax rate of 10% on cash dividends paid to foreign non-resident enterprises as shareholders of H Share. Pursuant tothe provisions regarding individual income tax on dividends and bonuses from listed companies of the StateAdministration of Taxation and the Ministry of Finance of the PRC, cash dividends paid to natural person shareholdersof A Share of the Company should also be subject to an individual income tax with 50% of its dividends as taxableincome and withholding of individual income tax by the Company at a tax rate of 20% according to the provisionsof current tax law.
As at the date of disclosure of this report, all final dividends for 2009 had been paid to the shareholders of theCompany.
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Disclosure of Major Events
III. INTERIM PROFITS DISTRIBUTION PLAN FOR 2010
The Company does not distribute interim dividends for 2010.
IV.ASSETS TRANSACTION
There was no material transaction of assets acquisition and disposal by the Company during the reporting period.
V. INVESTMENT OF THE COMPANY DURING THE REPORTING PERIOD
(1) Performance of Capital Expenditure Budgeted During the Reporting Period
In 2010, the Company’s capital expenditure mainly focused on three major sectors, which were coal resourcesdevelopment, coal conversion and coal industry services, and included three categories, which were infrastructureprojects, acquisition and maintenance of fixed assets and equity investment. The budgeted capital expenditurefor 2010 was RMB23.498 billion. During the reporting period, the actual investment amount was RMB7.592billion, representing 32.3% of the annual budget.
Unit: RMB100 Million
Actual investmentof capital Percentage
expenditure budgeted of thefrom January total budget
No. Business sector to June 2010 (%)
1 Coal 57.91 76.28
2 Coal chemical 12.53 16.50
3 Coal mining equipment 2.73 3.60
4 Power generation 1.25 1.65
5 Others 1.50 1.97
Total 75.92 100.00
During the reporting period, most of the Company’s key construction projects were located in northern Chinaand therefore had a short construction period. In addition, certain factors such as land expropriation, villagerelocation and the strengthening of supervision over the safety and environment protection by the state resultedin certain delays in the construction schedule. Moreover, some projects were in the process of applying forexternal approval or carrying out preliminary work. It is expected that the construction of such projects willcommence in the second half of 2010.
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Interim Report2010
Disclosure of Major Events
(2) Use of Proceeds
1. General Use of Proceeds
Unit: RMB100 Million
Total amountof proceeds Total amountused during of proceeds Total amount
Year of Net the reporting used of unapplied Intended use ofproceeds Method proceeds period accumulatively proceeds unapplied proceeds
2006 Initial H Share issue 144.66 — 144.66 — —
2008 Initial A Share issue 253.20 0.78 46.02 207.18 Deposited as term depositwith the bank with which
the special account forproceeds was maintained.
Total / 397.86 0.78 190.68 207.18 /
2. Use of proceeds from H Share issue
After deducting related expenses, the net proceeds from H Share issue of the Company was RMB14.466billion. As at 31 December 2009, all net proceeds have been used in accordance with the usage plansdisclosed in the prospectus of H Share. As at 30 June 2010, the progress of each of the projects is as follows:
1) Pingshuo Antaibao Underground Mine has been completed, came into operation and generated revenue;
2) The Heilongjiang Methanol Project with a production capacity of 250,000 tons/year has been completed,came into operation and generated revenue;
3) Pingshuo East Open Pit Mine Project, related coal washing plants and dedicated railways in PingshuoMining Area, and the comprehensive utilization project of waste materials of coal mines in Heilongjiangprovince were still under construction and no revenue was generated.
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Disclosure of Major Events
3. Use of proceeds from A Share issue
As at 30 June 2010, the actual application of A Share proceeds amounted to RMB4.602 billion, representingapproximately 18.2% of the net proceeds from A Share issue, details of which are listed below:
Unit: RMB100 Million
Net Proceeds Raised 253.20 Total proceeds applied duringthe reporting period 0.78Total proceeds applied accumulatively 46.02
WhetherCommitted Any Proposed Actual plannedproject change investment investment schedule Expected Actual
in project amount amount is met revenue revenue
Ordos project and ancillary engineeringprojects with an annual productioncapacity of 25 million tons of coal,4.2 million tons of methanol and3 million tons of dimethyl ether No 41.58 4.57 No — —
Heilongjiang project and ancillaryengineering projects with an annualproduction capacity of 10 million tonsof coal, 1.8 million tons of methanoland 0.6 million tons of olefin Yes 170.29 0.12 No — —
Supplementing the working capitalof the Company for general corporatepurposes or for the acquisitions of corebusiness related assets No 41.33 41.33 Yes — —
Total — 253.20 46.02 — — —
Reasons for failure to meet 1. Ordos project and ancillary engineering projects with an annual production capacity ofschedule (by project) 25 million tons of coal, 4.2 million tons of methanol and 3 million tons of dimethyl ether:
Currently the application for the project approval is under way and the preparationworks have been basically completed.
2. Heilongjiang project and ancillary engineering projects with an annual production capacityof 10 million tons of coal, 1.8 million tons of methanol and 0.6 million tons of olefin:
On 14 July 2010, the Board of the Company passed a resolution to cease application ofproceeds from the A Share issue to the project and change the investment projects by usingsurplus of the proceeds and interests from A Share issue. The aforesaid matters are subject toapproval at the first extraordinary general meeting of the Company in 2010.
Intended use of Deposited as term deposit with the bank with which the special account for proceeds wasunapplied proceeds maintained.
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Disclosure of Major Events
As at 30 June 2010, the unused amount of the proceeds from A Share issue was RMB20.718 billion,representing 81.8% of the net proceeds from A Share issue.
The Heilongjiang project and ancillary engineering projects with an annual production capacity of 10 milliontons of coal, 1.8 million tons of methanol and 0.6 million tons of olefin (hereafter “Heilongjiang Coal ChemicalProject”) planned to have a total investment of RMB17.029 billion from A Share issue proceeds, with RMB12million already being invested. Due to the global financial crisis since the second half of 2008, the domesticand international macroeconomic conditions have significantly deteriorated. The Company conducted researchand economic estimation for the Heilongjiang Coal Chemical Project at the Yongqing Mining Area of JixiHeilongjiang according to the market situation. As a result, the expected level of profitability of the HeilongjiangCoal Chemical Project may not be achieved. On 27 March 2009, the second meeting of the first session ofthe Board of the Company in 2009 decided to suspend investment in the Heilongjiang Coal Chemical Project.Given the foregoing circumstances, for the purpose of maximizing the Company’s commercial interest andprotecting shareholders’ interest, the second meeting in 2010 of the first session of the Board approved tochange the usage of the net proceeds from the A Share issue for the Heilongjiang Coal Chemical Project. Thesurplus of RMB17.017 billion resulted from the termination of the use of the net proceed from A Share forHeilongjiang Coal Chemical Project (accounting for about 67.21% of the net A share proceeds) plus RMB422million interests accrued in the A Share proceeds special account amounted to RMB17.439 billion in total, ofwhich RMB14.601 billion will be invested in the following new projects and RMB2.838 billion will be used tosupplement the working capital of the Company:
(1) The Nalin River No. 2 Coal Mine Project developed by Wushenqi Mengda Mining Company Limited withan annual production capacity of eight million tons of coal is proposed to use RMB1.669 billion of theproceeds from A Share issue;
(2) The Muduchaideng Coal Mine Project developed by Ordos Yihua Mining Resources Company Limitedwith an annual production capacity of six million tons of coal is proposed to use RMB4.464 billion of theproceeds from A Share issue;
(3) The Xiaohuigou Coal Project developed by Shanxi China Coal Pingshuo Xiaohuigou Coal Co., Ltd withan annual production capacity of three million tons of coal is proposed to use RMB2.806 billion of theproceeds from A Share issue;
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Disclosure of Major Events
(4) The Hecaogou Coal Mine Project developed by Shaanxi Yan’an Hecaogou Coal Mine Co., Ltd. (preparatory)with an annual production capacity of three million tons of coal is proposed to use RMB1.2 billion of theproceeds from A Share issue;
(5) The Zhangjiakou Coal Machinery Equipment Industrial Park Project to be developed by China CoalZhangjiakou Coal Mining Machinery Co., Ltd. is proposed to use RMB2.362 billion of the proceeds fromA Share issue;
(6) The Yulin Energy and Chemical Comprehensive Utilization Project to be developed by Yulin Energy andChemical Co., Limited with an annual production capacity of 600 thousand tons of polyethylene and600 thousand tons of polypropylene is proposed to use RMB2.1 billion of the proceeds from A Shareissue;
For details, please see the announcement in relation to the change of the investment projects by using the netproceeds from A Share issue published at the websites of SSE and HKSE by the Company on 14 July 2010. Thematter regarding the change of the investment projects by using the net proceeds from A Share issue is subjectto approval at the first extraordinary general meeting of the Company for the year 2010.
As at 30 June 2010, the above-mentioned projects by using the net proceeds from A Share issue were still underpreparation or construction and no revenue was generated.
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Disclosure of Major Events
(3) Status of Investment Projects with Funds not Raised through the Issue of Shares
The status of major investment projects with funds not raised through the issue of shares for 2010 were set out below:
Unit: RMB100 Million
Progress of the project
Project name Amount The actual Theinvolved in investment accumulativethe project from status up to
January to the end of Revenue generatedJune 2010 June 2010 from the project
Wangjialing Coal Mine in Xiangning of Shanxi 50.21 3.33 22.99 Currently, the project iswith a production capacity of 6 million tons/year not completed and no revenue is
generated.
Kongzhuang Mine renovation and expansion 5.32 0.01 2.50 Currently, the project isworks in Jiangsu not completed and no revenue is
generated.
Renovation works on the raw coal transportation 6.57 2.00 5.60 Currently, the project issystem of Antaibao Open Pit Mine in Pingshuo not completed and no revenue is
generated.
Pingshuo comprehensive maintenance plant of 2.93 0.42 1.77 Currently, the project islarge-scale open pit mining equipment not completed and no revenue
is generated.
Yaoqiao coal preparation plant in Jiangsu 1.38 — 1.25 The project is under preparationof acceptance and generalcompletion acceptance will beconducted immediately.
Shuozhou Great Coal Gangue-fired Power Plant 14.09 — 14.08 The grid has achievedProject with a production capacity of 2 x 135MW grid-connected generationin Shanxi and general completion
acceptance will be conductedimmediately.
Phase 2 of Shaqu gas-fired power plant in Shanxi 5.18 0.93 2.53 Currently, the project is notcompleted and no revenue isgenerated.
Heilongjiang Methanol Project with a production 11.82 1.18 12.36 The project is completed with acapacity of 250,000 tons/year revenue of RMB127 million realized.
High-precision aluminum sheets project in Jiangsu 17.01 1.46 9.49 Currently, the project isnot completed and no revenue isgenerated.
Mine used flame proof motor with high-power 2.34 — 2.34 The project is under finaland high voltage of Fushun Coal Mine Electrical accounting and is preparedMachinery Company Limited for acceptance.
Construction of Zhangjiakou Coal Machinery 23.62 0.70 2.58 Currently, the project isEquipment Industrial Park Project not completed and no revenue
is generated.
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Disclosure of Major Events
VI.PURCHASE, SALE OR REDEMPTION OF LISTED SECURITIES OF THE COMPANY
For the six months ended 30 June 2010, the Company and its subsidiaries had not purchased, sold or redeemed anysecurities (the term “securities” has the meaning ascribed to it under the Listing Rules) of the Company.
VII.SUBSTANTIAL INTERESTS AND SHORT POSITIONS
As at 30 June 2010, the interests or short positions of persons (other than directors or supervisors of the Company)who are entitled to exercise or control the exercise of 5% or more of the voting rights at the Company’s generalmeetings in the Company’s shares or underlying shares of the Company’s equity derivatives as recorded in theregister of interests required to be kept by the Company pursuant to Section 336 of the Securities and FuturesOrdinance were as follows:
Unit: shares
Name of Number of Class of Nature of Capacity Percentage of Percentage inshareholders shares shares interest the respective the total
type of shares % shares in issue %
China National Coal 7,481,643,773 A Share N/A Beneficial owner 81.75 56.43
Group Corporation
JPMorgan Chase & Co 324,640,666 H Share Long position of which 31,356,866 7.91 2.45
shares were held as beneficial
owners, 72,028,000 shares were
held as investment manager,
221,255,800 shares were held
as custodian – corporation/
approved lending agents
19,680,751 Short position Beneficial owner 0.48 0.15
221,255,800 Lending pool Custodian – corporation/ 5.39 1.67
approved lending agents
Blackrock, Inc. 291,966,895 H Share Long position Interests in corporations 7.11 2.20
controlled by major shareholders
1,884,724 Short position Interests in corporations 0.05 0.01
controlled by major shareholders
Davis Selected Advisors, L.P. 248,098,000 H Share Long position Investment manager 6.04 1.87
Note: The information disclosed above was based on the information provided by the website of HKSE (www.hkex.com.hk).
Save as disclosed above, as at 30 June 2010, there were no any other persons who had any interests or held shortpositions in the Company’s shares or underlying shares of equity derivatives of the Company as recorded in theregister of interests required to be kept pursuant to Section 336 of the Securities and Futures Ordinance.
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Disclosure of Major Events
VIII. DIRECTORS’ AND SUPERVISORS’ INTERESTS AND SHORT POSITIONS IN THESHARES, UNDERLYING SHARES AND DEBENTURES OF THE COMPANY
As at 30 June 2010, none of the directors or supervisors of the Company had any interests or short positions inshares, underlying shares of equity derivatives or debentures of the Company or any of its associated corporations(within the meaning of Part XV of the Securities and Futures Ordinance) as recorded in the register of interestsrequired to be kept by the Company pursuant to Section 352 of the Securities and Futures Ordinance, or as otherwiseshall be notified to the Company and the Stock Exchange pursuant to the Model Code for Securities Transactions byDirectors of Listed Companies.
As at 30 June 2010, the Company had not granted any rights to any directors, supervisors of the Company or theirspouses or children under 18 years of age to acquire shares or debentures of the Company or its associated corporationsnor did they exercise any such rights to acquire the aforesaid shares or debentures.
IX. EMPLOYEES AND REMUNERATION POLICY
As at 30 June 2010, the Company had a total of 55,450 employees, of which, 4,612 were management staff, 8,131were technical staff, 1,023 were sales staff, 35,763 were production staff and 5,921 were other staff.
An annual remuneration package and a corresponding appraisal and incentive scheme have been implemented forthe Board and senior management members of the Company. The annual remuneration for senior managementmembers consists of base salary and performance salary income. The base salary is determined on the basis of theoperational scale of the Company, with reference to the prevailing market wages and income of employees. Theperformance salary income is determined based on the actual operational results of the Company. The base salaryfor the directors and senior management of the Company is paid on a monthly basis whereas the performance salaryincome is paid after an annual performance appraisal.
The Company actively optimizes the allocation of human resources. Through recruiting management and technicalstaff from the society, cooperating with higher education institutions by training programs to foster immediatelyneeded talents for the Company, and creating new recruiting, training and deploying mechanism, sufficient humanresources can be ensured for the production, operation and sustainable development of the Company.
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Disclosure of Major Events
X. OTHER MAJOR EVENTS
On 28 March 2010, a flooding accident occurred in the course of construction of Wangjialing Coal Mine, a mineunder construction owned by Huajin Company, which was 50% owned by China Coal Energy. As a result, 153workers of the construction unit (China Coal No. 1 Construction Company Limited, a subsidiary of China CoalGroup) were trapped in the mine, among whom, 115 trapped workers were rescued while the death toll was 38. Atpresent, the rescue work had come to an end and the State Council had set up an accident investigation group,which was carrying out an investigation of the accident.
As the Wangjialing Coal Mine was a project under construction, the accident did not result in any material impact onthe current production and operation of China Coal Energy. After the accident, the completion and operation dateof Wangjialing Coal Mine, which was originally scheduled in October 2010, was delayed. As at 30 June 2010, HuajinCompany had incurred RMB38.928 million for the rescue work.
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XI.FORWARD-LOOKING STATEMENTS
The Company would also like to draw the readers’ attention to the forward-looking nature of certain statementsabove. These forward-looking statements are subject to risks and uncertainties and assumptions, which are beyondthe Company’s control. Such potential risks and uncertainties include those concerning the market conditions ofcoal and coking operations in China, the changes of the regulatory environment and the Company’s ability tosuccessfully execute its business strategies. In addition, these forward-looking statements only reflect the Company’scurrent views with respect to future events but do not serve as a guarantee of the Company’s future performance.The Company does not intend to update these forward-looking statements. Actual results of the Company’sperformance may differ from the forward-looking statements as a result of a number of factors.
CHINA COAL ENERGY COMPANY LIMITEDInterim Report
2010
Report of Independent Auditor
53
TO THE BOARD OF DIRECTORS OF CHINA COAL ENERGY COMPANY LIMITED(Incorporated in the People’s Republic of China with limited liability)
IntroductionWe have reviewed the interim financial information set out on pages 54 to 94, which comprises the condensed consolidatedbalance sheet of China Coal Energy Company Limited (the “Company”) and its subsidiaries (together, the “Group”) asat 30 June 2010 and the related condensed consolidated interim statements of income, comprehensive income, changesin equity and cash flows for the six-month period then ended, and a summary of significant accounting policies andother explanatory notes. The Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limitedrequire the preparation of a report on interim financial information to be in compliance with the relevant provisionsthereof and International Accounting Standard 34 “Interim Financial Reporting”. The directors of the Company areresponsible for the preparation and presentation of this interim financial information in accordance with InternationalAccounting Standard 34 “Interim Financial Reporting”. Our responsibility is to express a conclusion on this interimfinancial information based on our review and to report our conclusion solely to you, as a body, in accordance with ouragreed terms of engagement and for no other purpose. We do not assume responsibility towards or accept liability toany other person for the contents of this report.
Scope of ReviewWe conducted our review in accordance with International Standard on Review Engagements 2410 “Review of InterimFinancial Information Performed by the Independent Auditor of the Entity”. A review of interim financial informationconsists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analyticaland other review procedures. A review is substantially less in scope than an audit conducted in accordance with InternationalStandards on Auditing and consequently does not enable us to obtain assurance that we would become aware of allsignificant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.
ConclusionBased on our review, nothing has come to our attention that causes us to believe that the interim financial informationis not prepared, in all material respects, in accordance with International Accounting Standard 34 “Interim FinancialReporting”.
PricewaterhouseCoopersCertified Public Accountants
Hong Kong, 13 August 2010
CHINA COAL ENERGY COMPANY LIMITEDInterim Report
2010
Condensed Consolidated Interim Balance Sheet
As at 30 June 2010(Amounts expressed in thousands of RMB)
54
30 June 31 December2010 2009
Note Unaudited Audited
ASSETS
Non-current assetsProperty, plant and equipment 5 39,791,311 36,729,099
Investment properties 31,780 32,403
Land use rights 710,602 711,189
Mining rights 6 15,865,802 12,176,414
Intangible assets 36,589 42,388
Investments in associates 2,027,176 2,029,934
Investments in jointly controlled entities 412,326 412,305
Available-for-sale financial assets 947,315 936,787
Deferred income tax assets 13 285,760 251,077
Long-term receivables 626,894 626,894
Total non-current assets 60,735,555 53,948,490
Current assetsInventories 7 5,822,948 4,978,327
Trade and note receivables 8 7,907,078 4,963,537
Prepayments and other receivables 9 4,863,171 3,679,013
Derivative financial instruments 3,215 —
Restricted bank deposits 10 2,056,269 1,844,098
Term deposits with initial terms of over three months 10 22,226,164 22,813,484
Cash and cash equivalents 10 12,663,483 12,628,413
Total current assets 55,542,328 50,906,872
TOTAL ASSETS 116,277,883 104,855,362
EQUITY
Equity attributable to the equity holders of the CompanyShare capital 11 13,258,663 13,258,663
Reserves 37,961,859 37,299,283
Retained earnings
– Dividends proposed after the balance sheet date — 1,986,651
– Others 16,454,699 11,683,897
67,675,221 64,228,494
Non-controlling interests 11,218,466 9,214,509
Total equity 78,893,687 73,443,003
CHINA COAL ENERGY COMPANY LIMITEDInterim Report
2010
Condensed Consolidated Interim Balance Sheet
As at 30 June 2010(Amounts expressed in thousands of RMB)
55
30 June 31 December2010 2009
Note Unaudited Audited
LIABILITIES
Non-current liabilitiesLong-term borrowings 12 11,534,672 11,286,700
Long-term payables 191,834 192,302
Deferred income tax liabilities 13 3,849,546 2,744,873
Deferred revenue 241,726 237,779
Provision for employee benefits 247,400 275,990
Provision for close down, restoration and environmental costs 16 1,127,098 1,155,530
Total non-current liabilities 17,192,276 15,893,174
Current liabilitiesTrade and note payables 14 7,883,159 6,801,448
Accruals and other payables 15 9,799,406 7,085,494
Tax payables 1,425,838 610,177
Short-term borrowings 12 396,096 386,981
Current portion of long-term borrowings 12 661,078 602,658
Current portion of provision for close down,restoration and environmental costs 16 26,343 32,427
Total current liabilities 20,191,920 15,519,185
Total liabilities 37,384,196 31,412,359
TOTAL EQUITY AND LIABILITIES 116,277,883 104,855,362
NET CURRENT ASSETS 35,350,408 35,387,687
TOTAL ASSETS LESS CURRENT LIABILITIES 96,085,963 89,336,177
This condensed consolidated interim financial information has been approved for issue by the Board of Directors on 13August 2010.
Wang An Weng Qing’anChairman of the Board Chief Financial Officer
Executive Director Manager of Finance Department
The accompanying notes are an integral part of this condensed consolidated interim financial information.
CHINA COAL ENERGY COMPANY LIMITEDInterim Report
2010
Condensed Consolidated Interim Income Statement
For the six months ended 30 June 2010(Amounts expressed in thousands of RMB, except per share data)
56
Six months ended 30 June2010 2009
Unaudited UnauditedNote and restated
Revenue 4 35,089,896 22,742,718
Cost of salesMaterials (14,064,396) (7,544,873)
Staff costs (1,873,063) (1,518,553)
Depreciation and amortisation (1,281,947) (806,050)
Repair and maintenance (314,449) (316,845)
Transportation costs (4,377,432) (3,260,572)
Sales taxes and surcharges (691,366) (443,972)
Others (3,156,221) (2,255,078)
Cost of sales (25,758,874) (16,145,943)
Gross profit 9,331,022 6,596,775
Selling, general and administrative expenses (1,631,080) (1,239,507)
Other income 18 314,798 812,724
Other gains, net 256,734 74,289
Profit from operations 8,271,474 6,244,281
Finance costs, net 19 (278,905) (168,259)
Share of profits of associates and jointly controlled entities 15,348 14,032
Profit before income tax 8,007,917 6,090,054
Income tax expense 20 (2,034,623) (1,492,298)
Profit for the period 5,973,294 4,597,756
Profit attributable to:Equity holders of the Company 5,445,702 4,341,621
Non-controlling interests 527,592 256,135
5,973,294 4,597,756
Basic and diluted earnings per share for the profitattributable to the equity holders of the Company (RMB Yuan) 21 0.41 0.33
Dividends distributed 22 1,986,651 2,043,559
Dividends proposed after the balance sheet date 22 — —
CHINA COAL ENERGY COMPANY LIMITEDInterim Report
2010
Condensed Consolidated Interim Statement ofComprehensive Income
For the six months ended 30 June 2010(Amounts expressed in thousands of RMB)
57
Six months ended 30 June2010 2009
Unaudited Unauditedand restated
Profit for the period 5,973,294 4,597,756
Other comprehensive income:Fair value (losses)/gains on available-for-sale financial assets, net of tax (7,352) 10,405
Currency translation differences (932) (1,047)
Other comprehensive (loss)/income for the period, net of tax (8,284) 9,358
Total comprehensive income for the period 5,965,010 4,607,114
Total comprehensive income attributable to:Equity holders of the Company 5,437,418 4,350,979
Non-controlling interests 527,592 256,135
5,965,010 4,607,114
The accompanying notes are an integral part of this condensed consolidated interim financial information.
CHINA COAL ENERGY COMPANY LIMITEDInterim Report
2010
Condensed Consolidated Interim Statementof Changes in Equity
For the six months ended 30 June 2010(Amounts expressed in thousands of RMB)
58
The accompanying notes are an integral part of this condensed consolidated interim financial information.
Attributable to the equity holdersof the Company
Non-Share Retained controlling Total
capital Reserves earnings Subtotal interests equity
UnauditedBalance at 1 January 2009
(as previously reported) 13,258,663 36,458,034 8,824,897 58,541,594 4,228,695 62,770,289
Business combination undercommon control — 86,498 (50,889) 35,609 21,430 57,039
Balance at 1 January 2009(restated) 13,258,663 36,544,532 8,774,008 58,577,203 4,250,125 62,827,328
Total comprehensive income forthe period ended 30 June 2009 — 9,358 4,341,621 4,350,979 256,135 4,607,114
Appropriations — 807,760 (807,760) — — —
Dividends (Note 22) — — (2,043,559) (2,043,559) (39,825) (2,083,384)
Purchase of non-controlling interest — (49,783) — (49,783) (1,417) (51,200)
Acquisition of a subsidiary(Note 2(c)) — — — — 267,556 267,556
Capital contribution bynon-controlling interests — — — — 320,000 320,000
Others — — — — 1,915 1,915
Balance at 30 June 2009(restated) 13,258,663 37,311,867 10,264,310 60,834,840 5,054,489 65,889,329
UnauditedBalance at 1 January 2010 13,258,663 37,299,283 13,670,548 64,228,494 9,214,509 73,443,003
Total comprehensive income forthe period ended 30 June 2010 — (8,284) 5,445,702 5,437,418 527,592 5,965,010
Appropriations — 674,900 (674,900) — — —
Dividends (Note 22) — — (1,986,651) (1,986,651) (86,829) (2,073,480)
Acquisition of a subsidiary(Note 2(b)) — — — — 1,176,644 1,176,644
Capital contribution bynon-controlling interests — — — — 398,560 398,560
Disposal of a subsidiary — — — — (12,010) (12,010)
Others — (4,040) — (4,040) — (4,040)
Balance at 30 June 2010 13,258,663 37,961,859 16,454,699 67,675,221 11,218,466 78,893,687
CHINA COAL ENERGY COMPANY LIMITEDInterim Report
2010
Condensed Consolidated Interim Cash Flow Statement
For the six months ended 30 June 2010(Amounts expressed in thousands of RMB)
59
Six months ended 30 June2010 2009
Unaudited UnauditedNote and restated
Cash flows from operating activitiesCash generated from operations 23 6,016,322 4,855,483
Interest paid (273,958) (291,841)
Interest income received 489,177 1,713,445
Income tax paid (1,353,147) (1,851,022)
Net cash generated from operating activities 4,878,394 4,426,065
Cash flows from investing activitiesPurchases of property, plant and equipment (4,507,440) (3,571,549)
Proceeds from disposal of property, plant and equipment 15,187 6,415
Purchase of land use rights, mining rights and intangible assets (228,804) (375,124)
Proceeds from disposal of derivative financial instrumentsand other financial assets at fair value through profit or loss — 465,367
Proceeds from disposal of available-for-sale financial assets 35,000 7,786
Purchase of available-for-sale financial assets — (225,753)
Purchase of non-controlling interests in certain subsidiaries (118,370) (51,200)
Net cash (outflow)/inflow from acquisition ofcertain subsidiaries (Note 2(b), 2(c)) (580,151) 171,008
Net cash outflow from disposal of a subsidiary (14,787) —
Increase in investments in associates (142,120) (62,215)
Dividends received 33,200 477
Decrease/(increase) in term deposits with initial terms of over three months 587,320 (744,247)
Prepayment for investments (35,000) —
Net cash used in investing activities (4,955,965) (4,379,035)
CHINA COAL ENERGY COMPANY LIMITEDInterim Report
2010
Condensed Consolidated Interim Cash Flow Statement
For the six months ended 30 June 2010(Amounts expressed in thousands of RMB)
60
Six months ended 30 June2010 2009
Unaudited UnauditedNote and restated
Cash flows from financing activitiesProceeds from short-term borrowings 60,000 40,000
Repayments of short-term borrowings (50,885) (300,409)
Proceeds from long-term borrowings 500,000 1,520,000
Repayments of long-term borrowings (246,109) (281,777)
Repayments of borrowings from non-controlling shareholders (456,234) —
Dividends paid to non-controlling interests (94,065) (31,768)
Capital contributed by non-controlling interests 398,560 320,000
Net cash generated from financing activities 111,267 1,266,046
Net increase in cash and cash equivalents 33,696 1,313,076
Cash and cash equivalents, at beginning of the period 12,628,413 7,888,283
Net foreign exchange gains 1,374 1,956
Cash and cash equivalents at end of the period 12,663,483 9,203,315
The accompanying notes are an integral part of this condensed consolidated interim financial information.
CHINA COAL ENERGY COMPANY LIMITEDInterim Report
2010
Notes to the Condensed ConsolidatedInterim Financial Information
For the six months ended 30 June 2010(Amounts expressed in thousands of RMB unless otherwise stated)
61
1 ORGANISATION AND PRINCIPAL ACTIVITIES
China Coal Energy Company Limited (the “Company”) was established in the People’s Republic of China (the “PRC”)on 22 August 2006 as a joint stock company with limited liability under the Company Law of the PRC as a result ofa group restructuring of China National Coal Group Corporation (“China Coal Group” or the “Parent Company”).The Company and its subsidiaries (collectively the “Group”) are principally engaged in mining and processing ofcoal, sales of coal and coke products and manufacturing and sales of coal mining machinery. The address of theCompany’s registered office is 1 Huang Si Da Jie, Chaoyang District, Beijing, the PRC.
The H shares of the Company have been listed on The Main Board of the Stock Exchange of Hong Kong Limited sinceDecember 2006, while its A shares have been listed on the Shanghai Stock Exchange since February 2008.
This condensed consolidated interim financial information was approved for issue on 13 August 2010.
This condensed consolidated interim financial information has been reviewed, not audited by the independent auditors.
2 BASIS OF PRESENTATION
(a) This condensed consolidated interim financial information for the six months ended 30 June 2010 has beenprepared in accordance with International Accounting Standard (“IAS”) 34, ‘Interim Financial Reporting’. Thecondensed consolidated interim financial information should be read in conjunction with the annual financialstatements for the year ended 31 December 2009, which have been prepared in accordance with InternationalFinancial Reporting Standards (“IFRS”).
CHINA COAL ENERGY COMPANY LIMITEDInterim Report
2010
Notes to the Condensed ConsolidatedInterim Financial Information
For the six months ended 30 June 2010(Amounts expressed in thousands of RMB unless otherwise stated)
62
2 BASIS OF PRESENTATION (continued)
(b) Acquisition of Shanxi Xiaohuigou Coal Industry Company Limited in the six months ended 30 June 2010
In January 2010, the Company’s subsidiary, China Coal Pingshuo Coal Industry Company Limited (“PingshuoCoal”), entered into a share purchase agreement with Shanxi Donghui Coal Coking & Chemicals Group Co., Ltd.(“Donghui Group”) and an unrelated natural person, pursuant to which 55% equity interest in Shanxi XiaohuigouCoal Industry Company Limited (“Xiaohuigou Coal”) was transferred to Pingshuo Coal for a total considerationof RMB1,160,302,000. Xiaohuigou Coal is principally engaged in coal mining.
Summary of the assets, liabilities and net assets of Xiaohuigou Coal at the date of acquisition are set out below:
Fair valueUnaudited
Property, plant and equipment 89,571
Mining rights 3,585,353
Trade and other payables (189,571)
Deferred income tax liabilities (870,588)
2,614,765
Attributable to non-controlling interests 1,176,644
Attributable to the equity holders of the Company 1,438,121
2,614,765
Cash paid for the acquisition 580,151
Cash and cash equivalents acquired from the acquisition —
Net cash outflow from the acquisition 580,151
CHINA COAL ENERGY COMPANY LIMITEDInterim Report
2010
Notes to the Condensed ConsolidatedInterim Financial Information
For the six months ended 30 June 2010(Amounts expressed in thousands of RMB unless otherwise stated)
63
2 BASIS OF PRESENTATION (continued)
(c) Acquisition of Xi’an Coal Mining Machinery Company Limited in 2009
Prior to 1 January 2009, the Company’s subsidiary, China National Coal Mining Equipment Company Limited(“China Coal Equipment”), held 50% of the total shareholdings of Xi’an Coal Mining Machinery CompanyLimited (“Xi’an Mining Machinery”) and accounted for it as a jointly controlled entity by using the equity method.Effective from 1 January 2009, China Coal Equipment has obtained effective control over Xi’an Mining Machinery,and as such Xi’an Mining Machinery became a subsidiary of the Group.
The assets and liabilities of Xi’an Mining Machinery were adjusted to their fair values on 1 January 2009 based onthe valuation report issued by a qualified independent valuer.
Summary of the assets, liabilities and net assets at the date of commencement of accounting for Xi’an MiningMachinery as a subsidiary, are set out below:
Fair value
Cash and cash equivalents 171,008
Trade and other receivables 258,406
Inventories 378,261
Property, plant and equipment 78,445
Land use rights 70,491
Deferred income tax liabilities (7,762)
Trade and other payables (413,014)
Tax payables (723)
535,112
Attributable to non-controlling interests 267,556
Attributable to the equity holders of the Company 267,556
535,112
Cash and cash equivalents acquired from accountingfor Xi’an Mining Machinery as a subsidiary 171,008
Net cash inflow from accounting for Xi’an Mining Machinery as a subsidiary 171,008
CHINA COAL ENERGY COMPANY LIMITEDInterim Report
2010
Notes to the Condensed ConsolidatedInterim Financial Information
For the six months ended 30 June 2010(Amounts expressed in thousands of RMB unless otherwise stated)
64
2 BASIS OF PRESENTATION (continued)
(d) Acquisition of Xuzhou Sifang Aluminium Group Company Limited in 2009
On 10 September 2009, Shanghai Datun Energy Resources Company Limited (“Shanghai Datun”) entered intoa share purchase agreement with Datun Coal & Electricity Company Limited (“DTCE Company”), pursuant towhich DTCE Company transferred its 100% equity interest in Xuzhou Sifang Aluminium Group Company Limited(“Sifang Aluminium”) to Shanghai Datun for a cash consideration of RMB93,197,000. The acquisition wasapproved by the shareholders’ meeting of Shanghai Datun held on 10 September 2009 and by the relevantgovernment authority on 19 October 2009. The consideration has been fully paid by 31 December 2009. SifangAluminium is principally engaged in manufacturing and processing of aluminium related products.
The Company holds a 62.43% equity interest in Shanghai Datun, while DTCE Company is a wholly-ownedsubsidiary of China Coal Group. Hence, this transaction does not affect the ultimate control of Shanghai Datun,DTCE Company and Sifang Aluminium by China Coal Group, and that control is not transitory. As such thisacquisition was considered as a common control combination, and the Company had accounted for it in amanner similar to uniting of interests.
The Group’s comparative information for the six months ended 30 June 2009 has been restated as if the operationsof Sifang Aluminium had been under the control of the Company since the day that Sifang Aluminium was firstacquired by China Coal Group.
The effects of the acquisition of Sifang Aluminium to the Group’s financial information for the six months ended30 June 2009 are as follows:
Six months Six monthsended ended
30 June 2009 Acquisition 30 June 2009(as previously reported) of Sifang (restated)
Unaudited Aluminium Unaudited
Revenue 22,564,654 178,064 22,742,718
Profit/(loss) from operations 6,250,888 (6,607) 6,244,281
Net Profit/(loss) 4,607,639 (9,883) 4,597,756
CHINA COAL ENERGY COMPANY LIMITEDInterim Report
2010
Notes to the Condensed ConsolidatedInterim Financial Information
For the six months ended 30 June 2010(Amounts expressed in thousands of RMB unless otherwise stated)
65
3 SIGNIFICANT ACCOUNTING POLICIES
Except as described below, the accounting policies applied are consistent with those of the annual financial statementsfor the year ended 31 December 2009, as described in those annual financial statements.
(a) New and amended standards adopted by the Group
The following new standards and amendments to standards are mandatory for the first time for the financialyear beginning 1 January 2010.
• IFRS 3 (revised), ‘Business combinations’, and consequential amendments to IAS 27, ‘Consolidated and separatefinancial statements’, IAS 28, ‘Investments in associates’, and IAS 31, ‘Interests in joint ventures’, are effectiveprospectively to business combinations for which the acquisition date is on or after the beginning of the firstannual reporting period beginning on or after 1 July 2009.
The revised standard continues to apply the acquisition method to business combinations but with somesignificant changes compared with IFRS 3. For example, all payments to purchase a business are recorded atfair value at the acquisition date, with contingent payments classified as debt subsequently re-measuredthrough the income statement. There is a choice on an acquisition-by-acquisition basis to measure the non-controlling interest in the acquiree either at fair value or at the non-controlling interest’s proportionate shareof the acquiree’s net assets. All acquisition-related costs are expensed.
As the Group has adopted IFRS 3 (revised), it is required to adopt IAS 27 (revised), ‘consolidated and separatefinancial statements’, at the same time. IAS 27 (revised) requires the effects of all transactions with non-controlling interests to be recorded in equity if there is no change in control and these transactions will nolonger result in goodwill or gains and losses. The standard also specifies the accounting when control is lost.Any remaining interest in the entity is re-measured to fair value, and a gain or loss is recognised in profit orloss.
• IFRS 8 (amendment) ‘Operating segments’, effective for periods beginning on or after 1 January 2010.Disclosure of information about total assets and liabilities for each reportable segment is required only ifsuch amounts are regularly provided to the chief operating decision maker. The Group has applied IFRS 8(amendment) from 1 January 2010. The Group has revisited its information provided to the chief operatingdecision maker and determined such information should be included in disclosure of segment information.
• IAS 17 (amendment) ‘Leases’, effective for periods beginning on or after 1 January 2010. The amendmentremoves the specific guidance on the classification of long-term leases of land as operating lease. Whenclassifying land leases, the general principles applicable to the classification of leases should be applied. Theclassification of land leases has to be reassessed on adoption of the amendment on the basis of informationexisting at inception of the leases. The Group has applied IAS 17 (amendment) from 1 January 2010. TheGroup’s management has reassessed land leases classification by referring to the general principles set out inthe standard, and concluded that the amendment has no impact on the Group’s classification of land leaseswhich are considered as operating lease.
CHINA COAL ENERGY COMPANY LIMITEDInterim Report
2010
Notes to the Condensed ConsolidatedInterim Financial Information
For the six months ended 30 June 2010(Amounts expressed in thousands of RMB unless otherwise stated)
66
3 SIGNIFICANT ACCOUNTING POLICIES (continued)
(b) Standards, amendments and interpretations to existing standards effective in 2010 but not relevant to the Group:
• IFRIC 17, ‘Distributions of non-cash assets to owners’.
• IFRS 1 (amendment), ‘Additional exemptions for first-time adopters’.
• IAS 39 (amendment), ‘Eligible hedged items’.
• IFRS 2 (amendment), ‘Group cash-settled share-based payment transaction’.
• First improvements to International Financial Reporting Standards (2008) were issued in May 2008 by theIASB. The improvement related to IFRS 5 “Non-current assets held for sale and discontinued operations” iseffective for annual period on or after 1 July 2009.
• Second improvements to International Financial Reporting Standards (2009) were issued in April 2009 by theIASB. All improvements are effective in the financial year of 2010.
(c) The following new standards, new interpretations and amendments to standards and interpretations have beenissued, but are not effective for the financial year beginning 1 January 2010 and have not been early adopted:
• IFRS 9, ‘Financial instruments’ addresses the classification and measurement of financial assets and is likely toaffect the Group’s accounting for its financial assets. The standard is not applicable until 1 January 2013 butis available for early adoption. IFRS 9 only permits the recognition of fair value gains and losses in othercomprehensive income if they relate to equity investments that are not held for trading. Fair value gains andlosses on available-for-sale debt investments, for example, will therefore have to be recognised directly inprofit or loss. The Group has not yet decided when to adopt IFRS 9 and management is assessing the impactof the new standard.
• IAS 24 (revised), ‘Related Party Disclosures’ exempts disclosures in relation to related party transactions andoutstanding balances, including commitments, with a government that has control, joint control or significantinfluence over the reporting entity and another entity that is related party because the same government hascontrol, joint control or significant influence over both the reporting entity and the other entity. IAS 24(revised) is effective for annual periods commencing on or after 1 January 2011. The Group will apply IAS 24(revised) in relation to related party transactions and outstanding balances from 1 January 2011.
CHINA COAL ENERGY COMPANY LIMITEDInterim Report
2010
Notes to the Condensed ConsolidatedInterim Financial Information
For the six months ended 30 June 2010(Amounts expressed in thousands of RMB unless otherwise stated)
67
3 SIGNIFICANT ACCOUNTING POLICIES (continued)
(c) The following new standards, new interpretations and amendments to standards and interpretations have beenissued, but are not effective for the financial year beginning 1 January 2010 and have not been early adopted:(continued)
• IAS 32 (amendment), ‘Classification of rights issues’, for rights issues offered for a fixed amount of foreigncurrency, current practice appears to require such issues to be accounted for as derivative liabilities. Theamendment states that if such rights are issued pro rata to all the entity’s existing shareholders in the sameclass for a fixed amount of currency, they should be classified as equity regardless of the currency in whichthe exercise price is denominated. The amendment should be applied for annual periods beginning on orafter 1 February 2010. Earlier application is permitted. This amendment is not currently relevant to the Groupas no such transaction has been taken place.
• IFRIC-Int 14 (amendments), ‘Prepayments of a minimum funding requirement’, corrects an unintendedconsequence of IFRIC-Int 14, ‘IAS 19 - The limit on a defined benefit asset, minimum funding requirementsand their interaction’. Without the amendments, entities are not permitted to recognise as an asset for anysurplus arising from the voluntary prepayment of minimum funding contributions in respect of future service.This was not intended when IFRIC-Int 14 was issued, and the amendments correct the problem. Theamendments are effective for annual periods beginning 1 January 2011. Earlier application is permitted. Theamendments should be applied retrospectively to the earliest comparative period presented. The amendmentsare not currently relevant to the Group.
• IFRIC-Int 19, ‘Extinguishing financial liabilities with equity instruments’ clarifies the requirements of IFRSswhen an entity renegotiates the terms of a financial liability with its creditor and the creditor agrees to acceptthe entity’s shares or other equity instruments to settle the financial liability fully or partially. The interpretationis effective for annual periods beginning on or after 1 July 2010. Earlier application is permitted. Theinterpretation is not currently relevant to the Group as it does not have such transaction.
• IFRS 1 (amendment), ‘Limited exemption from comparative IFRS 7 disclosures for first-time adopters’, providefirst-time adopters with the same transition provisions as included in the amendment to IFRS 7 in relation torelief from presenting comparative information that ended before 31 December 2009 for new fair valuedisclosures requirements. This is required to be applied for annual periods beginning on or after 1 July 2010.Early adoption is permitted. This amendment is not relevant to the Group, as it is an existing IFRS preparer.
• Third improvements to International Financial Reporting Standards (2010) were issued in May 2010 by IASB.All improvements are effective in the financial year of 2011.
CHINA COAL ENERGY COMPANY LIMITEDInterim Report
2010
Notes to the Condensed ConsolidatedInterim Financial Information
For the six months ended 30 June 2010(Amounts expressed in thousands of RMB unless otherwise stated)
68
4 SEGMENT INFORMATION
1) General information
a. Factors that management used to identify the entity’s reportable segments
The chief operating decision-maker (“CODM”) has been identified as the President Office(總裁辦公會). Itreviews the Group’s internal reporting in order to assess performance and allocate resources. Managementhas determined the operating segments based on the reports reviewed by the President Office that are usedto make strategic decisions.
The Group’s reportable segments are entities or group of entities that offer different products and services,which is the basis by which the CODM makes decisions about resources to be allocated to the segment andassesses its performance. They are managed according to different nature of products and services, productionprocess and the environment in which they are operating. Most of these entities engage in just one singlebusiness, except for a few entities dealing with a variety of operations. Financial information of these entitieshas been separately presented as discrete segment information for CODM’s review.
b. Types of products and services from which each reportable segment derives its revenues
The CODM assesses the performance of three reportable segments: coal, coke and coal-chemical productand mining machinery.
Types of products from which each reportable segment derives its revenues are as follows:
• Coal - Production and sales of coal;
• Coke and coal-chemical products - Production and sales of coke and coal-chemical products;
• Mining machinery - Manufacturing and sales of mining machinery.
Turnover consists of sales from coal, coke and coal-chemical products and mining machinery, which areRMB27,879 million, RMB2,516 million and RMB3,042 million for the six months ended 30 June 2010 andRMB17,238 million, RMB1,395 million and RMB2,563 million for the six months ended 30 June 2009respectively.
CHINA COAL ENERGY COMPANY LIMITEDInterim Report
2010
Notes to the Condensed ConsolidatedInterim Financial Information
For the six months ended 30 June 2010(Amounts expressed in thousands of RMB unless otherwise stated)
69
4 SEGMENT INFORMATION (continued)
2) Information about reportable segment profit, assets and liabilities
a. Measurement of operating segment profit or loss, assets and liabilities
The measurement of profit or loss, assets and liabilities of the operating segments are the same as thosedescribed in the summary of significant accounting policies. The CODM evaluates performance on the basisof profit or loss before income tax expense. The Group accounts for intersegment sales and transfers as if thesales or transfers were to third parties, i.e. at current market prices. The amounts of segment information aredenominated in RMB, which is consistent with the amounts in the reports used by the CODM.
b. Reportable segments’ profit, assets and liabilities
For the six months ended and as at 30 June 2010 (unaudited)Coke and
coal-chemical Others
Coal product Machinery (note (a)) Total
RevenueTotal Revenue 28,082,121 2,515,589 3,383,447 1,900,855 35,882,012
Inter-segment revenue (202,643) — (341,428) (248,045) (792,116)
Revenue from external customers 27,879,478 2,515,589 3,042,019 1,652,810 35,089,896
Profit from operations 7,848,088 5,194 288,038 105,348 8,246,668
Profit/(loss) before tax expense 7,661,582 (42,108) 261,027 81,590 7,962,091
Interest revenue 15,178 25,879 1,145 292 42,494
Interest expense (84,209) (42) (6,161) (21,571) (111,983)
Depreciation and amortisation (1,201,098) (85,297) (57,873) (33,481) (1,377,749)
Share of profits of associates andjointly controlled entities 15,298 4,099 2,107 — 21,504
Income tax expense (1,963,680) (11,015) (46,401) (13,527) (2,034,623)
Other material non-cash itemsProvision for impairment of assets (7,261) (68,125) (15,515) (25,414) (116,315)
Segment assets and liabilitiesSegment assets 69,901,257 7,290,918 8,333,038 5,690,303 91,215,516
Including investment in associatesand jointly controlled entities 350,843 514,475 46,082 — 911,400
Expenditures for non-current assets 3,994,117 460,659 221,527 103,771 4,780,074
Segment liabilities 24,508,836 627,633 3,838,528 3,552,168 32,527,165
CHINA COAL ENERGY COMPANY LIMITEDInterim Report
2010
Notes to the Condensed ConsolidatedInterim Financial Information
For the six months ended 30 June 2010(Amounts expressed in thousands of RMB unless otherwise stated)
70
4 SEGMENT INFORMATION (continued)
2) Information about reportable segment profit, assets and liabilities (continued)
b. Reportable segments’ profit, assets and liabilities (continued)
For the six months ended 30 June 2009 (unaudited and restated)and as at 31 December 2009 (audited)
Coke andcoal-
chemical OthersCoal product Machinery (note (a)) Total
RevenueTotal Revenue 17,356,883 1,394,858 2,802,884 1,946,970 23,501,595
Inter-segment revenue (118,693) — (239,747) (400,437) (758,877)
Revenue from external customers 17,238,190 1,394,858 2,563,137 1,546,533 22,742,718
Profit from operations 5,326,405 36,391 254,799 97,318 5,714,913
Profit/(loss) before tax expense 5,209,166 (13,036) 226,896 81,236 5,504,262
Interest revenue 32,702 28,088 2,664 2,524 65,978
Interest expense (101,921) (1,277) (1,803) (3,470) (108,471)
Depreciation and amortisation (805,254) (57,421) (52,097) (10,832) (925,604)
Share of profits/(losses) of associatesand jointly controlled entities (4,513) 21,862 3,455 — 20,804
Income tax expense (1,430,039) (21,279) (23,823) (17,157) (1,492,298)
Other material non-cash itemsReversal of/(provision for)
impairment of assets (7,813) (1,570) 18,479 (85,647) (76,551)
Segment assets and liabilitiesSegment assets 58,081,775 6,633,475 7,202,438 5,398,766 77,316,454
Including investment in associatesand jointly controlled entities 420,013 510,376 44,592 — 974,981
Expenditures for non-current assets 8,052,225 396,441 276,839 1,029,578 9,755,083
Segment liabilities 20,383,955 836,849 3,420,181 3,444,578 28,085,563
note:
(a) Revenue from segments below the quantitative thresholds are attributable to four operating segments of the Group. Those segments include an aluminium
factory, two power generating plants, an equipment purchase agency and a tendering service provider. None of those segments has ever met any of the
quantitative thresholds as a reportable segment.
CHINA COAL ENERGY COMPANY LIMITEDInterim Report
2010
Notes to the Condensed ConsolidatedInterim Financial Information
For the six months ended 30 June 2010(Amounts expressed in thousands of RMB unless otherwise stated)
71
4 SEGMENT INFORMATION (continued)
3) Reconciliations of reportable segment revenue, profit or loss, assets and liabilities
a. Revenue
Six months ended 30 June2010 2009
Unaudited Unauditedand restated
Total revenue for reportable segments 35,882,012 23,501,595
Elimination of inter-segment revenue (792,116) (758,877)
The Group’s revenue 35,089,896 22,742,718
b. Profit from operations
Six months ended 30 June2010 2009
Unaudited Unauditedand restated
Total profit from operations for reportable segments 8,246,668 5,714,913
Elimination of inter-segment profits (267,776) (33,130)
Other corporate income 292,582 562,498
Profit from operations 8,271,474 6,244,281
c. Profit before tax
Six months ended 30 June2010 2009
Unaudited Unauditedand restated
Total profit before tax expense for reportable segments 7,962,091 5,504,262
Elimination of inter-segment profits (98,732) (22,312)
Other corporate income 144,558 608,104
Profit before tax expense 8,007,917 6,090,054
CHINA COAL ENERGY COMPANY LIMITEDInterim Report
2010
Notes to the Condensed ConsolidatedInterim Financial Information
For the six months ended 30 June 2010(Amounts expressed in thousands of RMB unless otherwise stated)
72
4 SEGMENT INFORMATION (continued)
3) Reconciliations of reportable segment revenue, profit or loss, assets and liabilities (continued)
d. Assets
30 June 31 December2010 2009
Unaudited Audited
Total assets for reportable segments 91,215,516 77,316,454
Elimination of inter-segment accounts (3,095,081) (2,855,969)
Other unallocated amounts 28,157,448 30,394,877
The Group’s assets 116,277,883 104,855,362
e. Liabilities
30 June 31 December2010 2009
Unaudited Audited
Total liabilities for reportable segments 32,527,165 28,085,563
Elimination of inter-segment accounts (2,622,286) (2,379,564)
Other unallocated amounts 7,479,317 5,706,360
The Group’s liabilities 37,384,196 31,412,359
CHINA COAL ENERGY COMPANY LIMITEDInterim Report
2010
Notes to the Condensed ConsolidatedInterim Financial Information
For the six months ended 30 June 2010(Amounts expressed in thousands of RMB unless otherwise stated)
73
4 SEGMENT INFORMATION (continued)
3) Reconciliations of reportable segment revenue, profit or loss, assets and liabilities (continued)
f. Other material items
For the six months ended and as at 30 June 2010 (Unaudited)Reportable Adjustments The Group’s
segment totals (note (a)) totals
Interest revenue 42,494 234,972 277,466
Interest expense (111,983) (78,190) (190,173)
Depreciation and amortisation (1,377,749) (597) (1,378,346)
Share of profits/(losses) of associatesand jointly controlled entities 21,504 (6,156) 15,348
Income tax expense (2,034,623) — (2,034,623)
Provision for impairment of assets (116,315) — (116,315)
Investment in associates andjointly controlled entities 911,400 1,528,102 2,439,502
Expenditures for non-current assets 4,780,074 11,191 4,791,265
For the six months ended 30 June 2009 (unaudited and restated)and as at 31 December 2009 (audited)
Reportable Adjustments The Group’ssegment totals (note (a)) totals
Interest revenue 65,978 487,468 553,446
Interest expense (108,471) (123,698) (232,169)
Depreciation and amortisation (925,604) (185) (925,789)
Share of profits/(losses) of associates andjointly controlled entities 20,804 (6,772) 14,032
Income tax expense (1,492,298) — (1,492,298)
Provision for impairment of assets (76,551) — (76,551)
Investment in associates andjointly controlled entities 974,981 1,467,258 2,442,239
Expenditures for non-current assets 9,755,083 562 9,755,645
note:
(a) Amounts represent: (i) other items from non-reportable segments which are comprised of assets, liabilities, gains and expenses of corporate function; and (ii)
items that eliminated on a group basis.
CHINA COAL ENERGY COMPANY LIMITEDInterim Report
2010
Notes to the Condensed ConsolidatedInterim Financial Information
For the six months ended 30 June 2010(Amounts expressed in thousands of RMB unless otherwise stated)
74
4 SEGMENT INFORMATION (continued)
4) Geographical information
Analysis of revenue
Six months ended 30 June2010 2009
Unaudited Unauditedand restated
Domestic markets 34,539,868 22,052,565
Asia Pacific markets 545,624 670,658
Other overseas markets 4,404 19,495
35,089,896 22,742,718
note:
(a) Revenue is attributed to countries on the basis of the customer’s location.
Analysis of non-current assets
30 June 31 December2010 2009
Unaudited Audited
Domestic markets 58,818,083 52,067,922
Asia Pacific markets 8,404 8,568
Other overseas markets 49,099 57,242
58,875,586 52,133,732
5) Information about major customers
Revenue from top five customers of the Group for the six months ended 30 June 2010 represents approximately21% of the Group’s total revenue (for the six months ended 30 June 2009: 38%).
CHINA COAL ENERGY COMPANY LIMITEDInterim Report
2010
Notes to the Condensed ConsolidatedInterim Financial Information
For the six months ended 30 June 2010(Amounts expressed in thousands of RMB unless otherwise stated)
75
5 PROPERTY, PLANT AND EQUIPMENT
30 June 31 December2010 2009
Unaudited Audited
Opening net book amount 36,729,099 29,010,371
Acquisition of subsidiaries (Note 2(b)) 89,571 1,033,134
Disposal of a subsidiary — (154,786)
Additions 4,656,453 9,064,573
Disposals (259,988) (25,865)
Depreciation charge (1,337,308) (2,198,328)
Impairment (86,516) —
Closing net book amount 39,791,311 36,729,099
6 MINING RIGHTS
30 June 31 December2010 2009
Unaudited Audited
Opening net book amount 12,176,414 3,680,836
Acquisition of subsidiaries (Note 2(b)) 3,585,353 7,906,205
Additions 129,860 625,543
Amortisation (25,825) (36,170)
Closing net book amount 15,865,802 12,176,414
The mining rights are comprised of exploration rights and mining licences. The exploration rights are not subject toamortisation, and the mining licences are amortised from the commencement of commercial production of coalmine.
CHINA COAL ENERGY COMPANY LIMITEDInterim Report
2010
Notes to the Condensed ConsolidatedInterim Financial Information
For the six months ended 30 June 2010(Amounts expressed in thousands of RMB unless otherwise stated)
76
7 INVENTORIES
30 June 31 December2010 2009
Unaudited Audited
Coal 1,028,432 756,832
Coke 322,580 217,502
Machinery for sale 1,575,576 1,506,021
Auxiliary materials, spare parts and tools 2,896,360 2,497,972
5,822,948 4,978,327
8 TRADE AND NOTE RECEIVABLES
30 June 31 December2010 2009
Unaudited Audited
Trade receivables, net (note (a)) 5,927,248 3,254,693
Note receivables (note (b)) 1,979,830 1,708,844
7,907,078 4,963,537
notes:
(a) Aging analysis of trade receivables on the balance sheet date is as follows:
30 June 31 December
2010 2009
Unaudited Audited
Within 6 months 5,198,213 2,755,968
6 months - 1 year 470,311 290,107
1 - 2 years 265,067 213,102
2 - 3 years 65,143 57,117
Over 3 years 246,901 238,032
Trade receivables, gross 6,245,635 3,554,326
Less: Impairment of receivables (318,387) (299,633 )
Trade receivables, net 5,927,248 3,254,693
Trade receivables are with credit terms of six months.
(b) Note receivables are bills of exchange with maturity of less than one year.
CHINA COAL ENERGY COMPANY LIMITEDInterim Report
2010
Notes to the Condensed ConsolidatedInterim Financial Information
For the six months ended 30 June 2010(Amounts expressed in thousands of RMB unless otherwise stated)
77
9 PREPAYMENTS AND OTHER RECEIVABLES
30 June 31 December2010 2009
Unaudited Audited
Advances to suppliers 2,556,087 1,524,529
Interest receivable 132,004 343,715
Dividends receivable 25,044 21,817
Amounts due from related parties, gross 438,483 350,313
Prepayment for future investment (note (a)) 360,000 360,000
Prepayment for investments 411,959 376,959
Prepayment for mining rights 340,520 340,520
Amounts due from third parties, gross 952,903 704,560
5,217,000 4,022,413
Less: Impairment of other receivables (353,829) (343,400)
Prepayments and other receivables, net 4,863,171 3,679,013
note:
(a) The amount as at 30 June 2010 and 31 December 2009 represents deposit paid to the government for guaranteeing certain potential investments, which will be repaid
by the government when the investments are completed.
10 CASH AND BANK DEPOSITS
30 June 31 December2010 2009
Unaudited Audited
Restricted bank deposits (note (a)) 2,056,269 1,844,098
Term deposits with initial terms of over three months 22,226,164 22,813,484
Cash and cash equivalents– Cash on hand 2,133 1,857
– Deposits with banks and other financial institutions 12,661,350 12,626,556
36,945,916 37,285,995
note:
(a) Restricted bank deposits mainly include the deposits set aside for the transformation fund and the environmental restoration fund as required by the regulations and
deposits pledged for issuance of notes payable.
CHINA COAL ENERGY COMPANY LIMITEDInterim Report
2010
Notes to the Condensed ConsolidatedInterim Financial Information
For the six months ended 30 June 2010(Amounts expressed in thousands of RMB unless otherwise stated)
78
11 SHARE CAPITAL
30 June 2010 (Unaudited) 31 December 2009 (Audited)
Number of Number ofshares shares
(thousands) Nominal value (thousands) Nominal value
Registered, issued and contributed:
Domestic shares of RMB1.00 each– held by China Coal Group 7,481,644 7,481,644 7,481,644 7,481,644
– held by other A share shareholders 1,670,356 1,670,356 1,670,356 1,670,356
H shares of RMB1.00 each– held by a wholly owned subsidiary of
China Coal Group 120,000 120,000 120,000 120,000
– held by other H share shareholders 3,986,663 3,986,663 3,986,663 3,986,663
13,258,663 13,258,663 13,258,663 13,258,663
A summary of the movements in the Company’s issued share capital is tabulated below:
H sharesDomestic held by a
Domestic shares held wholly owned H sharesshares held by other A subsidiary of held by other
by China share China Coal H shareCoal Group shareholders Group shareholders Total
At 1 January 2009 (Audited) 7,634,177 1,517,823 — 4,106,663 13,258,663
Share transaction (note (b)) (152,533) 152,533 120,000 (120,000) —
At 31 December 2009 and 30 June 2010(Audited and unaudited) 7,481,644 1,670,356 120,000 3,986,663 13,258,663
notes:
(a) The Domestic shares (A shares) rank pari passu, in all material respects, with the H shares. Nonetheless, the transfer of Domestic shares is subject to certain restrictions
imposed by the PRC law from time to time. The China Coal Group has promised a lock-up period of 36 months for transfer of approximately 7,626,667,000 A shares,
commencing on the date on which the A shares were listed on the Shanghai Stock Exchange.
(b) As at 31 December 2009, China Coal Hong Kong Limited, a wholly owned subsidiary of China Coal Group, held approximately 120,000,000 H Shares of the Company,
representing 0.91% of the Company’s total share capital.
In 2009, as prescribed by the PRC government, China Coal Group transferred 152,533,340 A shares, representing 10% of A Share issued on 1 February 2008 through
initial public offering on the Shanghai Stock Exchange, to the National Council for Social Security Fund.
CHINA COAL ENERGY COMPANY LIMITEDInterim Report
2010
Notes to the Condensed ConsolidatedInterim Financial Information
For the six months ended 30 June 2010(Amounts expressed in thousands of RMB unless otherwise stated)
79
12 BORROWINGS
30 June 31 December2010 2009
Unaudited Audited
Long-term borrowingsBank loans and loans from other financial institutions
– Secured 798,005 823,255
– Unsecured 11,381,745 11,050,103
12,179,750 11,873,358
Other unsecured loans from– Non-controlling shareholders of certain subsidiaries 16,000 16,000
12,195,750 11,889,358
Less: Amount due within one year under current liabilities (661,078) (602,658)
11,534,672 11,286,700
Short-term borrowingsBank loans and loans from other financial institutions
– Unsecured 395,496 386,381
Other unsecured loans from– Non-controlling shareholders of certain subsidiaries 600 600
396,096 386,981
notes:
(a) The movements in borrowings are analysed below:
Six months Year ended
ended 30 June 31 December
2010 2009
Unaudited Audited
Opening balance 12,276,339 11,080,521
Additions 560,000 2,485,985
Payments (296,994) (1,258,607 )
Exchange losses/(gains) 52,501 (31,560 )
Ending balance 12,591,846 12,276,339
CHINA COAL ENERGY COMPANY LIMITEDInterim Report
2010
Notes to the Condensed ConsolidatedInterim Financial Information
For the six months ended 30 June 2010(Amounts expressed in thousands of RMB unless otherwise stated)
80
12 BORROWINGS (continued)
(b) The Group’s borrowings are repayable as follows:
30 June 31 December
2010 2009
Unaudited Audited
Banks loans and loans from other financial institutions
– Within one year 1,057,174 989,639
– In the second year 1,028,245 971,658
– In the third to fifth year 3,698,317 3,841,432
– After the fifth year 6,792,110 6,457,610
12,575,846 12,260,339
Loans from non-controlling interests of certain subsidiaries
– In the third to fifth year 16,000 16,000
12,591,846 12,276,339
(c) The Group has the following undrawn borrowing facilities:
30 June 31 December
2010 2009
Unaudited Audited
Floating rates
– Expiring within one year — 26,652,330
– Expiring beyond one year 160,592,230 840,000
160,592,230 27,492,330
CHINA COAL ENERGY COMPANY LIMITEDInterim Report
2010
Notes to the Condensed ConsolidatedInterim Financial Information
For the six months ended 30 June 2010(Amounts expressed in thousands of RMB unless otherwise stated)
81
13 DEFERRED INCOME TAX
Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current taxassets against current tax liabilities and when the deferred income taxes relate to the same fiscal authority.
The movements in deferred tax assets and liabilities during the period, without taking into account the offsetting ofbalances within the same tax jurisdiction, are as follows:
Deferred Deferredincome income
tax assets tax liabilities Total
UnauditedOpening balance at 1 January 2010 1,760,945 (4,254,741) (2,493,796)
Credited/(Charged) to income statement 25,524 (227,377) (201,853)
Acquisition of a subsidiary (Note 2(b)) — (870,588) (870,588)
Charged to equity due to fair value change inavailable-for-sale financial assets — 2,451 2,451
Ending balance at 30 June 2010 1,786,469 (5,350,255) (3,563,786)
AuditedOpening balance at 1 January 2009 1,843,849 (1,931,793) (87,944)
Charged to income statement (69,252) (466,967) (536,219)
Acquisition of certain subsidiaries 4,370 (1,854,339) (1,849,969)
Disposal of a subsidiary (18,022) — (18,022)
Charged to equity due to fair value change inavailable-for-sale financial assets — (3,382) (3,382)
Credited to equity due to disposal ofavailable-for-sale financial assets — 1,740 1,740
Ending balance at 31 December 2009 1,760,945 (4,254,741) (2,493,796)
CHINA COAL ENERGY COMPANY LIMITEDInterim Report
2010
Notes to the Condensed ConsolidatedInterim Financial Information
For the six months ended 30 June 2010(Amounts expressed in thousands of RMB unless otherwise stated)
82
14 TRADE AND NOTE PAYABLES
30 June 31 December2010 2009
Unaudited Audited
Trade payables (note (a)) 7,393,012 6,341,696
Note payables 490,147 459,752
7,883,159 6,801,448
note:
(a) Aging analysis of trade payables on the balance sheet date is as follows:
30 June 31 December
2010 2009
Unaudited Audited
Less than 1 year 6,643,344 5,580,010
1 - 2 years 426,817 526,226
2 - 3 years 156,096 106,727
Over 3 years 166,755 128,733
7,393,012 6,341,696
15 ACCRUALS AND OTHER PAYABLES
30 June 31 December2010 2009
Unaudited Audited
Customer deposits and receipts in advance 2,595,122 2,241,013
Dividends payable 2,011,788 32,980
Payable for site restoration 174,621 203,841
Mineral resource compensation payable 109,831 122,614
Salaries and staff welfare payable 859,150 500,610
Interest payable 142,531 101,721
Payable for a mining right 398,016 389,085
Amounts due to related parties 1,239,978 2,054,981
Amounts due to third parties 2,268,369 1,438,649
9,799,406 7,085,494
CHINA COAL ENERGY COMPANY LIMITEDInterim Report
2010
Notes to the Condensed ConsolidatedInterim Financial Information
For the six months ended 30 June 2010(Amounts expressed in thousands of RMB unless otherwise stated)
83
16 PROVISION FOR CLOSE DOWN, RESTORATION AND ENVIRONMENTAL COSTS
30 June 31 December2010 2009
Unaudited Audited
Opening balance 1,187,957 1,086,715
Interest charge on unwinding of discount on provision 18,335 33,110
Provision, net of reversal 10,643 91,381
Payments (63,494) (23,249)
Ending balance 1,153,441 1,187,957
Less: current portion (26,343) (32,427)
1,127,098 1,155,530
17 EXPENSES BY NATURE
Expenses included in cost of sales and selling, general and administrative expenses are analysed below:
Six months ended 30 June2010 2009
Unaudited Unaudited andrestated
Depreciation 1,315,228 888,720
Amortisation 37,165 36,451
Cost of inventories sold 14,064,396 7,544,873
Transportation costs 4,377,432 3,260,572
Sales tax and surcharges 691,366 443,972
Auditors’ remuneration 2,800 4,800
Net gains on disposal of property, plant and equipment (10,675) (2,640)
Repair and maintenance 355,110 332,032
Operating lease rentals 64,212 105,672
Provision for impairment of receivables 29,182 19,396
Staff costs (including directors’ emoluments) 2,605,559 1,990,682
Resource compensation fees 257,976 177,248
Sustainable development charge 716,414 563,879
Other expenses 2,883,789 2,019,793
Total cost of sales, selling, general and administrative expenses 27,389,954 17,385,450
CHINA COAL ENERGY COMPANY LIMITEDInterim Report
2010
Notes to the Condensed ConsolidatedInterim Financial Information
For the six months ended 30 June 2010(Amounts expressed in thousands of RMB unless otherwise stated)
84
18 OTHER INCOME
Six months ended 30 June2010 2009
Unaudited Unaudited andrestated
Gains on disposal of investments 6,249 168,915
Interest income 277,466 553,446
Government grants and subsidies 31,083 90,363
314,798 812,724
19 FINANCE COSTS, NET
Six months ended 30 June2010 2009
Unaudited Unaudited andrestated
Interest expense 337,220 337,234
Less: Amounts capitalised in construction in progress (147,047) (105,065)
190,173 232,169
Interest charge on unwinding of discounts 18,335 56,582
Net foreign exchange losses/(gains) 51,127 (127,237)
Other incidental borrowing costs and charges 19,270 6,745
278,905 168,259
20 INCOME TAX EXPENSE
Six months ended 30 June2010 2009
Unaudited Unaudited
Current income tax– PRC enterprise income tax (note (a)) 1,832,770 1,081,631
Deferred income tax (Note 13) 201,853 410,667
2,034,623 1,492,298
note:
(a) The provision for PRC enterprise income tax (“EIT”) is calculated based on the statutory income tax rate of 25%, except for certain subsidiaries which are taxed at
preferential tax rates ranging from 12.5% to 22% based on the applicable PRC tax laws and regulations.
CHINA COAL ENERGY COMPANY LIMITEDInterim Report
2010
Notes to the Condensed ConsolidatedInterim Financial Information
For the six months ended 30 June 2010(Amounts expressed in thousands of RMB unless otherwise stated)
85
21 EARNINGS PER SHARE
Basic earnings per share for the six months ended 30 June 2010 and 2009 is calculated by dividing the profitattributable to equity holders of the Company by the weighted average number of approximately 13,258,663,000ordinary shares in issue during the periods.
As the Company had no dilutive instruments for the six months ended 30 June 2010 and 2009, diluted earnings pershare is the same as basic earnings per share.
22 DIVIDENDS
Six months ended 30 June2010 2009
Unaudited Unaudited
Dividends– final dividends for 2008 (note (a)) — 2,043,559
– final dividends for 2009 (note (b)) 1,986,651 —
notes:
(a) The Board of Directors, in a meeting held on 27 March 2009, proposed to distribute a final dividend for 2008 to equity holders of the Company of RMB2,044 million
(RMB0.15413 Yuan per share), based on total number of shares which are in issue as at 31 December 2008. Such dividend distribution was approved by the shareholders’
meeting held on 26 June 2009 and had been fully paid to shareholders in July 2009.
(b) The Board of Directors, in a meeting held on 22 April 2010, proposed to distribute a final dividend for 2009 to equity holders of the Company of RMB1,987 million
(RMB0.14984 Yuan per share), based on total number of shares which are in issue as at 31 December 2009. Such dividend distribution was approved by the shareholders’
meeting held on 25 June 2010 and had been fully paid to shareholders in July 2010.
CHINA COAL ENERGY COMPANY LIMITEDInterim Report
2010
Notes to the Condensed ConsolidatedInterim Financial Information
For the six months ended 30 June 2010(Amounts expressed in thousands of RMB unless otherwise stated)
86
23 NOTES TO THE CONDENSED CONSOLIDATED INTERIM CASH FLOW STATEMENT
(a) Reconciliation of profit for the period to net cash inflows generated from operations
Six months ended 30 June2010 2009
Unaudited Unaudited andrestated
Profit for the period 5,973,294 4,597,756
Adjustments for:Property, plant and equipment
– depreciation charge 1,315,228 888,720
– net gains on disposal (10,675) (2,640)
Investment property– depreciation charge 623 618
Land use rights, mining rights and intangible assets– amortisation charge 37,165 36,451
Provision for impairment of receivables 29,182 19,396
Reversal of impairment of inventories — (95,947)
Provision for impairment of property, plant and equipment 86,516 —
Share of profits of associates and jointly controlled entities (15,348) (14,032)
Net foreign exchange losses/(gains) 51,127 (127,237)
Gains on disposal of investments (6,249) (168,915)
Interest income (277,466) (553,446)
Interest expense 208,508 288,751
Income tax expense 2,034,623 1,492,298
Negative goodwill (277,818) —
Changes in working capital:Inventories (822,541) 83,143
Trade and note receivables (2,962,294) (356,980)
Prepayments and other receivables (1,179,743) (686,845)
Trade and note payables 1,003,757 (971,066)
Accruals and other payables 1,039,547 1,290,935
Restricted bank deposits (212,171) (732,093)
Provision for employee benefits (28,590) (17,518)
Provision for close down, restoration and environmental costs 29,647 (115,866)
CASH GENERATED FROM OPERATIONS 6,016,322 4,855,483
CHINA COAL ENERGY COMPANY LIMITEDInterim Report
2010
Notes to the Condensed ConsolidatedInterim Financial Information
For the six months ended 30 June 2010(Amounts expressed in thousands of RMB unless otherwise stated)
87
24 CONTINGENT LIABILITIES
(a) Bank and other guarantees
As at 30 June 2010 and 31 December 2009, the undiscounted amount of potential future payments underguarantees given to banks in respect of banking facilities extended to the parties below are as follows:
30 June 31 December2010 2009
Unaudited Audited
Associates 550,000 550,000
(b) The Group are defendants in certain lawsuits as well as plaintiffs in other proceedings arising in the ordinarycourse of business. While the outcomes of such lawsuits or other proceedings cannot be determined at present,management believes that any resulting liabilities will not have a material adverse effect on the financial positionor operating results of the Group.
25 COMMITMENTS
(a) Capital commitments
Capital expenditure contracted for at the balance sheet date but not yet incurred is as follows:
30 June 31 December2010 2009
Unaudited Audited
Property, plant and equipment 3,568,464 3,036,720
Capital investment 2,800,000 —
Others 419,164 358,585
6,787,628 3,395,305
CHINA COAL ENERGY COMPANY LIMITEDInterim Report
2010
Notes to the Condensed ConsolidatedInterim Financial Information
For the six months ended 30 June 2010(Amounts expressed in thousands of RMB unless otherwise stated)
88
25 COMMITMENTS (continued)
(b) Operating lease commitments - where the Group is the lessee
The Group has commitments to make the following future minimum lease payments under non-cancelableoperating leases:
30 June 31 December2010 2009
Unaudited Audited
Land and buildings:– Within 1 year 76,544 78,896
– From 1 year to 5 years 123,941 149,974
– Over 5 years 122,441 135,156
322,926 364,026
Plant and machinery:– Within 1 year 3,600 6,000
– From 1 year to 5 years 14,400 14,400
– Over 5 years 34,200 36,000
52,200 56,400
CHINA COAL ENERGY COMPANY LIMITEDInterim Report
2010
Notes to the Condensed ConsolidatedInterim Financial Information
For the six months ended 30 June 2010(Amounts expressed in thousands of RMB unless otherwise stated)
89
26 SIGNIFICANT RELATED PARTY TRANSACTIONS
China Coal Group, the immediate parent of the Company, is controlled by the PRC government. The PRC governmentis the Company’s ultimate controlling party. In accordance with IAS 24 (revised 2003), ‘Related Party Disclosures’,related parties include China Coal Group and its subsidiaries, other state-owned enterprises and their subsidiarieswhich the PRC government has control, joint control or significant influence over, and enterprises which the Companyis able to control, joint control or significant influence over, key management personnel of the Company and ChinaCoal Group and their close family members.
Related parties do not include public utilities (including electricity, telecommunication and postal service providers)and government department and agencies that do not control, jointly control or significant influence over the Companyand with which transactions are conducted in the ordinary course of business at arm’s length market prices.
The Group has extensive transactions with China Coal Group. For the purpose of disclosures of related partytransactions, to the extent possible, the Group has procedures in place to assist the identification of the immediateownership structure of its customers and suppliers as to whether they are related parties. Management believes thatall material related party transactions and balances, of which they are aware of, have been adequately disclosed.
Sales of goods and provision of services to state-owned enterprises are at prescribed prices or prices which are alsoavailable to other customers. The Group considers that these related party transactions are entered into in theordinary course of business.
Set out below is a summary of significant related party transactions and balances in the six months ended 30 June2010 and 2009.
CHINA COAL ENERGY COMPANY LIMITEDInterim Report
2010
Notes to the Condensed ConsolidatedInterim Financial Information
For the six months ended 30 June 2010(Amounts expressed in thousands of RMB unless otherwise stated)
90
26 SIGNIFICANT RELATED PARTY TRANSACTIONS (continued)
(a) Related party transactions
Six months ended 30 June2010 2009
Unaudited Unaudited
Transactions with the Parent Company and fellow subsidiaries:
Coal Export and Sales (i)Charges paid for agency services of coal export 57 2,549
Integrated Material and Services Mutual Provision (ii)Charges paid for production material and ancillary services 686,657 720,471
Charges paid for social and support services 38,038 39,865
Revenue received from supply of production material and ancillary services 165,907 91,239
Revenue received from provision of coal export-related services 19,918 23,953
Mine Construction and Design (iii)Charges paid for construction services 695,433 504,559
Revenue received from construction services — 580
Property Leasing (iv)Rental charge paid 36,151 39,006
Land Use Rights (v)Rental charge paid 11,045 8,965
Mine Design (vi)Charges paid for mine design services 73,155 —
Coal Supplies (vii)Charges paid for coal supplies 42,106 —
CHINA COAL ENERGY COMPANY LIMITEDInterim Report
2010
Notes to the Condensed ConsolidatedInterim Financial Information
For the six months ended 30 June 2010(Amounts expressed in thousands of RMB unless otherwise stated)
91
26 SIGNIFICANT RELATED PARTY TRANSACTIONS (continued)
(a) Related party transactions (continued)
(i) Under PRC law and regulations, coal exports shall only be made through one of four authorised PRC enterprisesincluding China Coal Group. The Company appointed China Coal Group as its coal export sales agent undera Coal Export and Sales Agency Framework Agreement entered into on 31 December 2008. Pursuant to theagreement, the agency fee for coal exports to countries and territories other than the China Taiwan marketis 0.7% of the FOB price in respect of each ton of coal products exported; and the agency fee for the coalexports and sales to the China Taiwan market is 0.7% of the FOB price, plus USD0.5 per ton of coal productssold. The agency fees are payable on a monthly basis, effective from 31 December 2008.
(ii) The Company and China Coal Group entered into Integrated Materials and Services Mutual ProvisionFramework Agreement on 31 December 2008, under which the Company provides to China Coal Groupand China Coal Group provides to the Company production material supplies and ancillary services, and theCompany also provides to China Coal Group export-related services.
(iii) The Company and China Coal Group entered into a Mine Construction, Mine Design and General ContractingService Framework Agreement on 31 December 2008. Pursuant to the agreement, China Coal Group and itssubsidiaries and units shall provide coal mine construction services to the Company and its subsidiaries andunits, and the Company and its subsidiaries and units shall provide mine design and general contractingservices to China Coal Group and its subsidiaries and units.
(iv) The Company and China Coal Group entered into a Property Leasing Framework Agreement on 5 September2006, under which the Company leases from China Coal Group certain buildings and properties in the PRCfor general business and ancillary purposes.
(v) The Company and China Coal Group entered into a Land Use Rights Leasing Framework Agreement on 5September 2006, under which the Company leases certain land use rights in the PRC from China Coal Groupfor general business and ancillary purposes.
(vi) The Company and China Coal Group entered into a Mine Design and General Contracting Service FrameworkAgreement on 31 December 2009, under which China Coal Group and its subsidiaries and units shall providecoal mine design and general contracting services to the Company and its subsidiaries and units.
(vii) The Company and China Coal Group entered into a Coal Supplies Framework Agreement on 31 December2008, under which China Coal Group will procure that all coal products produced from the retained minesbe supplied exclusively to the Company, and has undertaken not to sell any such coal products to any thirdparty.
CHINA COAL ENERGY COMPANY LIMITEDInterim Report
2010
Notes to the Condensed ConsolidatedInterim Financial Information
For the six months ended 30 June 2010(Amounts expressed in thousands of RMB unless otherwise stated)
92
26 SIGNIFICANT RELATED PARTY TRANSACTIONS (continued)
(a) Related party transactions (continued)
Six months ended 30 June2010 2009
Unaudited Unaudited
Transactions with jointly controlled entities
Sales and services providedSales of coal 6,845 18,382
Interest income 11,359 10,726
Transactions with associates
Sales and services providedSales of machinery and materials 22,614 16,979
Income from renting property, plant and equipment 66,054 63,853
Purchases of goods and servicesPurchases of materials 37,308 65,757
Transportation services (viii) 208,468 174,003
Transactions with non-controlling shareholders of subsidiaries
Sales and services providedSales of coal (ix) 68,358 63,830
Purchases of goods and servicesPurchases of coal (ix) 125,339 108,162
Charges paid for construction services (ix) 59,197 57,319
Transportation services (ix) 6,830 12,723
Interest expense 22,950 21,323
(viii) The Company entered into a Railway Leasing and Management Entrustment Service Framework Agreementwith Shuozhou Pingshuo Luda Railway Transportation Co., Limited (“Pingshuo Luda”; an associate) on 30December 2008, under which Pingshuo Luda leases a railway from the Company and also provides railwaymanagement entrustment services to the Company.
(ix) The Company entered into the Coal, Pertinent Products and Service Provision Framework Agreement withcertain non-controlling shareholders of subsidiaries (“Subsidiaries’ Non-controlling Shareholders”) on 1 January2009, under which the Company (or its relevant subsidiaries) shall sell to the Subsidiaries’ Non-controllingShareholders coal, pertinent products and/or mining equipments and provide mining design and/or generalcontractor services. The Subsidiaries’ Non-controlling Shareholders also shall sell to the Company coal, pertinentproducts and provide construction services and/or transportation services.
CHINA COAL ENERGY COMPANY LIMITEDInterim Report
2010
Notes to the Condensed ConsolidatedInterim Financial Information
For the six months ended 30 June 2010(Amounts expressed in thousands of RMB unless otherwise stated)
93
26 SIGNIFICANT RELATED PARTY TRANSACTIONS (continued)
(a) Related party transactions (continued)
Six months ended 30 June2010 2009
Unaudited Unaudited
Key management compensation
Salary, allowances and other benefits– Directors and supervisors 1,243 1,183
– Other key management 1,333 862
Pension costs-defined contribution plans– Directors and supervisors 27 25
– Other key management 92 63
Six months ended 30 June2010 2009
Unaudited Unauditedand restated
Transactions with other state-owned enterprises
Sales and services providedSales of coal 17,590,972 7,828,151
Sales of machinery and equipment 2,369,695 1,739,190
Sales of materials and spare parts 137,684 122,686
Design services — 48,643
Railway transportation services 28,894 24,239
Construction and technical services — 222,797
Public utilities and facilities income 286,634 69,765
Agency fee 17,943 5,317
Interest income 159,223 399,351
Purchases of goods and servicesPurchases of coal 4,112,747 520,843
Purchases of machinery and equipment 235,593 489,537
Purchases of labour services 9,940 12,062
Purchases of materials and spare parts 1,684,379 1,399,592
Construction and technical services 111,189 164,449
Ancillary and social services 111,368 138,168
Transportation services 3,521,292 2,610,174
Interest expense 256,583 245,400
CHINA COAL ENERGY COMPANY LIMITEDInterim Report
2010
Notes to the Condensed ConsolidatedInterim Financial Information
For the six months ended 30 June 2010(Amounts expressed in thousands of RMB unless otherwise stated)
94
26 SIGNIFICANT RELATED PARTY TRANSACTIONS (continued)
(b) Related party balances
Balances with state-owned enterprises
30 June 31 December2010 2009
Unaudited Audited
Deposits placed with banks and non-bank financial institutions 28,610,880 29,345,491
Loans from banks and non-bank financial institutions 12,238,649 10,069,081
Interest receivable 88,825 276,140
Interest payable 100,829 99,846
Details of deposits placed with, and loans from banks and non-bank financial institutions are disclosed in Notes10 and 12.
The above related party balances, other than deposits placed with, and loans from banks and non-bank financialinstitutions are unsecured, interest free and generally settled within one year.
27 SUBSEQUENT EVENTS
In July 2010, the Company signed certain comprehensive credit agreements and strategic cooperation agreementswith four state-owned banks and two non-state-owned commercial banks, marking the establishment of a long-term strategic cooperation relationship between the Company and these banks. According to these agreements,these banks will provide credit facilities of no more than RMB41,500 million to the Group within the next 5 years.
CHINA COAL ENERGY COMPANY LIMITED
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Company ProfileInterim Report
2010
I Company InformationStatutory Chinese Name of the Company 中國中煤能源股份有限公司
Abbreviated Statutory Chinese Name of the Company 中煤能源股份
Statutory English Name of the Company China Coal Energy Company Limited
Abbreviated Statutory English Name of the Company China Coal Energy
Legal Representative of the Company Wang An
II Information about Secretary to the Board of the CompanyName of Secretary to the Board Zhou Dongzhou
Contact Address of Secretary to the Board Secretariat of the Board of Directors, China Coal EnergyCompany Limited, No. 1 Huangsidajie, Chaoyang District, Beijing,China
Contact Telephone Number of Secretary to the Board (8610) - 82256482
Fax Number of Secretary to the Board (8610) - 82256479
E-mail Address of Secretary to the Board [email protected]
III Basic InformationRegistered Address and Office Address No. 1 Huangsidajie, Chaoyang District, Beijing, China
of the Company
Post Code 100120
Internet Website http://www. chinacoalenergy.com
E-mail Address [email protected]
IV Information Disclosure and Location for InspectionNames of newspapers designated for China Securities Journal, Shanghai Securities News, Secutimes.
information disclosure
Internet Website designated by CSRC for http://www.sse.com.cninterim report publication
Internet Website designated by the Stock Exchangeof Hong Kong for interim report publication http://www.hkex.com.hk
Location for inspection of interim report Secretariat of the Board of Directors, China Coal Energyof the Company Company Limited, No. 1 Huangsidajie, Chaoyang District, Beijing,
China
CHINA COAL ENERGY COMPANY LIMITED
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Company ProfileInterim Report
2010
V Brief Information of the Shares of the Company
Stock Exchange Short name Short name ofType of shares for listing of shares of Stock Stock code stock before change
A Shares Shanghai Stock Exchange 中煤能源 601898 —
H Shares The Stock Exchange ofHong Kong Limited China Coal Energy 01898 —
Authorised Representatives of the Company Yang Lieke, Zhou Dongzhou
Joint Company Secretaries Zhou Dongzhou, Wang Yuanheng
VI Other Basic Information of the CompanyDate of first registration of the Company 22 August 2006
Location of first business registration No. 1 Huangsidajie, Chaoyang District, Beijing, Chinaof the Company
Date of change in business registration 28 June 2010of the Company
Location of change in business registration No changeof the Company
Registration Number of Corporate Business License 100000000040475
Tax Registration Number Jing Shui Zheng Zi No.110105710934289
Organization code 71093428-9
VIIAccounting Firms Engaged by the CompanyName of domestic accounting firm engaged PricewaterhouseCoopers Zhong Tian CPAs Limited Company
by the Company
Office address of the domestic accounting firm 11/F, PricewaterhouseCoopers Center, 2 Corporate Avenue, No. 202engaged by the Company Hu Bin Road, Luwan District, Shanghai, China
Name of international accounting firm engaged PricewaterhouseCoopersby the Company
Office address of the international accounting 22/F, Prince’s Building, Central, Hong Kongfirm engaged by the Company
CHINA COAL ENERGY COMPANY LIMITED
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Company ProfileInterim Report
2010
VIII Legal Advisors of the CompanyPRC legal advisor of the Company Beijing Jiayuan Law Firm
Contact address F407 Ocean Plaza, 158 Fuxingmennei Avenue, Xicheng District,Beijing, China
Foreign legal advisor of the Company Freshfields Bruckhaus Deringer
Contact address 11/F, Two Exchange Square, Central, Hong Kong
IX Share Registrars and Transfer Offices for Domestic and Overseas Listed SharesRegistrar and Transfer Office for A Shares China Securities Depository and Clearing Corporation Limited
Shanghai Branch
Contact Address 36/F, China Insurance Building, 166 Lujiazui East Avenue, PudongNew District, Shanghai, China
Registrar and Transfer Office for H Shares Computershare Hong Kong Investors Services Limited
Contact Address Rooms 1712-1716, 17/F, Hopewell Centre, 183 Queen’s RoadEast, Wanchai, Hong Kong
CHINA COAL ENERGY COMPANY LIMITED
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DefinitionsInterim Report
2010
A Share(s) the domestic ordinary share(s) of RMB1.00 each in the share capital
of the Company, which are listed on the SSE and traded in RMB
Articles of Association the articles of association passed at the inaugural meeting of the
Company on 18 August 2006 and approved by the relevant state
authorities, as amended and supplemented from time to time
Board of the Company/Board the board of directors of China Coal Energy Company Limited
China Coal Group China National Coal Group Corporation, the controlling shareholder
of the Company
China Coal Hong Kong China Coal Hong Kong Limited, an overseas wholly-ownedsubsidiary of China Coal Group
ChinaCoal Longhua China Coal Longhua Group Co., Ltd. (中煤黑龍江煤炭化工(集團)有限公司 ), a holding subsidiary of China Coal Group
ChinaCoal Longhua Company China Coal Coal Chemical Engineering Company Limited (中煤能源黑龍江煤化工有限公司 ), a wholly-owned subsidiary of theCompany
CSRC China Securities Regulatory Commission
China Coal and Coke China Coal and Coke Holdings Limited
Directors the directors of the Company, including all the executive directors
and independent non-executive directors
H Share(s) the overseas listed foreign share(s) of RMB 1.00 each in the share
capital of the Company which are listed on the HKSE and traded in
Hong Kong dollars
Handan Design Company China Coal Handan Design Engineering Co., Ltd., a wholly-ownedsubsidiary of China Coal Group
CHINA COAL ENERGY COMPANY LIMITED
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DefinitionsInterim Report
2010
HKSE The Stock Exchange of Hong Kong Limited
Huajin Company Huajin Coking Coal Co., Ltd.
Listing Rules the Rules Governing the Listing of Securities on The Stock Exchange
of Hong Kong Limited
Ministry of Finance the Ministry of Finance of the People’s Republic of China
NSSF National Council for Social Security Fund of the People’s Republicof China
Pingshuo Coal Industry Company China Coal Pingshuo Coal Industry Company Limited, a wholly-owned subsidiary of the Company
Pingshuo Luda Shuozhou Pingshuo Luda Railway Transportation Co., Ltd.
Pingshuo Mining Area the coal mining area in Shanxi Province which mainly consists ofthe Antaibao Open Pit Mine and Underground Mine, the AnjialingOpen Pit Mine and Underground Mine, and the Jingdong Mine
SAIC the State Administration for Industry and Commerce of the People’sRepublic of China
SASAC the State-owned Assets Supervision and Administration Commissionof the State Council
Shanghai Datun Shanghai Datun Energy Resources Company Limited, a controllingsubsidiary of the Company
Share(s) the ordinary share(s) of RMB 1.00 each in the share capital of theCompany, including A Share(s) and H Share(s)
Shareholder(s) the shareholder(s) of the Company, including holder(s) of H Sharesand holder(s) of A Shares
SSE the Shanghai Stock Exchange
CHINA COAL ENERGY COMPANY LIMITED
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DefinitionsInterim Report
2010
SSE Listing Rules the Listing Rules of the Shanghai Stock Exchange
the Group/the Company/Company/ China Coal Energy Company Limited. Unless the context otherwiseChina Coal Energy specifies, also includes all of its subsidiaries
Xiaohuigou Coal Shanxi China Coal Pingshuo Xiaohuigou Coal Co., Ltd.
Xi’an Design Company China Coal Xi’an Design Engineering Co., Ltd., a wholly-ownedsubsidiary of China Coal Group
Yulin Energy and Chemical Co., Limited the company’s name has been changed to Shannxi Yulin Energyand Chemical Co., Ltd. after the Company’s capital increase andshare enlargement in Yulin Energy and Chemical Co., Ltd. of ShannxiYanchang Petroleum (Group) Co., Ltd.